Last week we posted ‘lessons from famous fashion designers‘ and it got us thinking about our own finances and how important it is to master them. So as a follow on this week we have started to look at how we can do this. It’s really just an overview so expect more in this area. You can also take a look at our ‘Fashion & Finances‘ report for more from the experts.
For the creative industry managing cash flow forecasts can quite often be a painstaking chore. It’s not what we’re born to do, or natural at! We innovate, we design and we work hard at the creative side of our business.
Checking on terms and conditions and chasing payment isn’t the most desirable part of the job! But, we can’t forget that managing finances is a cornerstone of any business.
In this post, we’re going to focus on some top tips when it comes to understanding cash flow, looking at the cost of late payment to businesses, as well as the importance of cementing your Terms and Conditions.
Building your cash flow picture
With reports released earlier this year highlighting that late payment is now one of the biggest reasons why an estimated 50,000 business have had to close every year, translating into a cost of £3.5bn annually to the economy – do you know how you can avoid such pitfalls?
- First, start by making sure you have your payment terms in order and highlighted on all invoices and order forms.
- Dot the i`s and cross the t`s, with good Terms and Conditions – include payment and delivery details, as well as what will happen if you don’t get paid.
- Look at payment or part payment in advance – this could be done if a costly fabric has to be imported in, or maybe you have to travel on-location for a photoshoot as a makeup artist.
- Consider early payment discounts, helping you to collect your cash faster and your customers also receiving a bargain.
- Vet the suppliers you may potentially be setting up an account with, what are their payment terms and their expectations?
- Finally, remember that everyone is human, and communication is key. If you do feel there is a going to be a problem, don’t wait for your business to suffer, deal with this as soon as possible.
Mastering your cash flow from the very beginning
Knowing the cash you have to play with from the outset will allow you to build a better understanding of what your payment terms need to be. How long can you wait for payment to be received, factoring in that you have your own suppliers to pay and their payment terms to meet.
In our next post, we’ll be taking this a step further to look at how you can maintain a strong financial position for you and your business.
Conclusion
The fashion industry isn’t easy and let’s face it finances are rarely spoken about, perhaps unless a new piece that a brand is looking to launch or a new exhibit is ready to open has captured your attention. However, for some of the biggest named brands in the fashion world, they have been through years of reinvention and a steep financial learning curve before achieving the level of financial success and standing they’re accustomed to today.
Check out our post on ‘Lessons to learn from some of the most famous fashion designers today,’ to find out more.
Check out our report ‘Fashion & Finances‘ for advice from the experts.