The Most Common Cash Flow Mistakes Studios Make

Cash flow is the thing that takes down otherwise good studios. Not bad design. Not difficult clients. Cash flow. Here are the mistakes we see most often.

Invoicing late

Many studios invoice at the end of a project phase rather than progressively throughout it. This means you're carrying the cost of the work for weeks or months before you see any money. Invoice regularly - monthly at minimum, or at agreed project milestones that are manageable.

No payment terms, or no enforcement of them

Thirty day payment terms mean nothing if you're not following up when invoices go overdue. Set your terms (7 days is good) issue your invoices on time, and follow up consistently when they're not paid. This is not optional.

Underestimating the gap between winning work and getting paid

A new project signed today will not generate cash for weeks. There's a fee proposal, a contract, mobilisation, then the first invoice, then the payment period. If your bank account can't survive that lag, you have a cash flow problem that a new project won't fix fast enough. Start working towards building up your capital account to survive a three month drought.

Not tracking project profitability in real time

If you only find out a project lost money when it's finished, you've lost the opportunity to do anything about it. Track hours against budget throughout the project so you can spot overruns early and have a conversation with the client before it becomes a crisis.

No cash flow forecast

A cash flow forecast is simply a projection of what money is coming in and going out over the next three to six months. It tells you when your account is likely to be tight before it actually is. Every studio should have one. Most don't.

None of this is complicated. It just requires discipline and a system that makes the discipline easy to maintain.