Cash flow management is an important part of running a business. Maintaining a positive cash flow is crucial if you want your business to thrive and flourish. So how can your business maintain a positive cash flow this year? Here are some tips for you.
- Monitor Cash Flow– The first step in cash management is keeping a close watch on your cash inflow and outflow. You need to be constantly aware of how and where your cash goes. Always measure cash flow, maintain proper updated records and make sure you have someone keeping a watch on it.
- Customer Relations– Customers form the backbone of any business. If you want to keep your business up and running, you need to keep your customers happy and inspire loyalty. Good customer relations ensure that your receivables are well managed and you have a steady positive cash flow. Avoid conflicts and be empathetic to your customers.
- Cash Reserves– As a business owner, you should always maintain a safety net. You never know when things can go wrong and what problems the future can bring, so be prepared for them. In business, it means having a solid cash reserve that you can fall back on should the need arise.
- Outsource Receivables– Every business is bound to have its share of clients who pay late or stall payments. Rather than go through the trouble of collecting payments and constantly contacting clients to remind about overdue payments, it is wise to outsource receivables and let the professionals take care of it. Not only does it increase your chances of getting paid, it also allows you to focus on growing your business.
Money is blood running through the veins of your business; there is only so far you can go without money. So be wise- manage your cash flow well and outsource receivables if needed. After all, what matters is that you keep your business up and running.
No one likes to run after their clients for payments even if it is their own money, however whether you like it or not, you need to get the money. Outstanding balances will adversely affect your cash flow and harm your business. So you need to make sure that you either outsource receivables management or have the right practices in place to get your money back as soon as possible; here is what you can do.
- Create a List of Overdue Payments– Create a list of overdue client payments, sorted by the amount owed and revise this list at least once a week. Make it a point to review this list once every day so you and your team know where you stand.
- Don’t Wait Till the Payment is Overdue to Make the Call– You do not have to wait till the payment is 30 days overdue to call your client. Contact your client in the guise of a customer service inquiry call and subtly remind them about the near overdue payment. Don’t be pushy on the call.
- Call Clients Frequently When Payment is Overdue– You do not want to lead your client to believe that you do not take overdue payments seriously, so contact your customers at least once in a week to follow up on the pending payment. Increase the frequency as the days go by.
If you find that the collection efforts are taking a toll on you and affecting your work, we suggest you outsource receivables management. The focus of any receivables management company is to collect your payments, which means they are focussed on the task and know how to get your clients to pay up. Outsource receivables, leave the collection to the professionals and focus on your business.
What do you do when you have to pay your employees, purchase stuff for office or for money to keep your business up and running? Dig into your working capital of course. To keep your business running, you need to have a positive working capital at all times, which means well managed AR and AP. Of these AR is tougher to manage, simply because it requires you to depend on others, namely clients and customers. But it doesn’t have to be so tough; learn how you can handle accounts receivable management effectively.
- Research Potential Client’s Financial and Credit History before Doing Business– A thorough evaluation of a potential client’s financial and credit history can go a long way in ensuring you don’t end up in a messy situation. Talking to representatives of other companies they have done business with or businesses that outsource receivables is also a good idea. If you find that the company is in debt and is obviously struggling to make payments, you can act accordingly.
- Clear Payment Terms and Information– Clarity in payment matters is important when doing business. Make sure you and your client are clear on the payment terms and provide an estimate of costs well in advance.
- Use Electronic Invoicing Facilities– How many times have you forgotten to send out invoices? Use electronic invoicing and you won’t have to worry about this ever again. Your invoices can be sent out as soon as your projects are completed and you can also be sure that the invoices reach the client without fail; no more getting lost in the mail.
- Use Multiple Payment Options– Payments may also be delayed if your modes of payment are inconvenient for clients. Offering multiple modes of payment will help to facilitate faster and timely payments.
- Outsource Receivables Management– Proper AR management is vital for your business to run smoothly. If you do not have the resources or time to devote to accounts receivable management, it would be better to outsource it, simply because you cannot afford to have AR ignored. Invest in a good account receivable management company and you won’t regret it.
Receivable management is possibly one of the most important, yet often ignored, non- core task of any business. The reason is that collecting receivables can take up a lot of time and effort, which you probably don’t have any to spare. Whatever the reason, not paying adequate attention to the receivables part of your business is detrimental to the health of your business. You need good receivable management to keep your profits, collect timely payments and to increase your cash inflow. If you find that you don’t have the time to devote to this part of your business, it would be a good idea to outsource receivables management. Here is how a good receivable management system can help you.
- Organize Accounts Receivable– For any business to be successful, it is important that at any point of time, you know which invoices are nearing their due date and which payments are overdue. An organized system allows you to be on top of all these details. It also means that you promptly send out invoices and proactively remind clients of due dates. This also increases the likelihood of you receiving timely payments. You are also in a better position to evaluate client relationships and to avoid vendors and clients who regularly default on payments.
- Send Detailed History of Communication– If you do end up with clients or vendors who default on payments, it will be good news to know that it has been found that presenting them with a detailed history of payment communication is more likely to get them to pay up. When you have your business to run, putting together these details can be difficult, which is why things can be easier if you outsource receivables management.
- Maintain a Steady Cash Flow– Maintaining a steady cash flow is important for numerous reasons. It will not only help you get a better handle on your business, it will also come in handy if you are looking to expand your business. Potential investors will want to know if you have a steady cash flow, so you need to ensure your receivable management is in check. If you think all that is too much for you, you could consider outsource receivables management; it can do you a world of good.
Receivable management is crucial for a business to flourish, so if you want your business to thrive, it’s about time you get your AR in order. If you don’t have the time or resources to handle your accounts receivable, outsource receivables management.