Healthy cash flow is the lifeblood of any business. With good cash flow management, you can meet your operational costs, keep your debts under control, and develop a strong relationship with your venders. Your cash flow can also help in case you need to pay for emergency maintenance, repairs, upgrades, or inventory costs.
Strong cash flow can also be used to take advantage of business opportunities such as buying goods for an upcoming busy season or a growth opportunity. Likewise, a business with good cash flow is more likely to be approved for a loan from a big bank to help with large-scale expansion plans.
As a reputable debt collection agency with over two decades in the business, we know how important cash flow is for the health of a company of any size and from any industry. With our services, many businesses collect on unpaid invoices, improve their cash flow position, and strengthen their accounts receivable ratio.
From our expertise, we know that a business can improve its cash flow in several different ways:
#1 Minimize Overheads
A surefire way to improve your cash flow is to minimize your expenses to only what’s useful for your business. Less money spent on unnecessary expenditures is more money in the bank.
#2 Evaluate Your Cash Flow
Perform a good forecast of your cash flow and use professional help if necessary. This can help you identify the cycles of your business and improve your marketing, financing, and hiring strategies. It will also help you formulate a plan to tackle cash flow issues. You may also notice periods where your invoices are paid more slowly and plan accordingly. Our Accounts Receivable Consulting services can provide insights on increasing cash flow while reducing bad debt write-offs.
#3 Put Your Cash to Work
If possible, deposit your cash in a high-interest savings account without withdrawal limits or penalties. This way, your money can generate more funds, but you can access it when required. Consider using a business credit card without annual fees and pay it off within the grace period to avoid interest rates and to better manage your cash flow.
With growth, use your buying volume to leverage your suppliers into giving you discounts. You can also work with other companies to secure lower prices by buying as a collective.
#4 Encourage Electronic Payments
Instead of checks, encourage payment methods such as credit cards, debit cards, and online options. This may boost sales as most customers prefer more modern payment solutions. It will also help you get paid faster. A check can take taken to collect, deposit, and clear.
Unpaid invoices are also more likely to be cleared when there are faster payment methods for your customers. There’s plenty of time for a debtor to change their mind by the time head to the post office with a signed check.
#5 Shorten Your Receivables
An excellent way to improve your cash flow is to get paid faster. Certain practices can help you shorten your receivables and put money in your pocket faster.
- Payment Terms: Consider adopting shorter payment terms. Instead of sixty days, you can set payment terms to thirty days or less.
- Offer Incentives: Encourage your customers to pay early by offering incentives such as discounts, add-ons and more. For example, in the software industry, early adopters are offered once-in-a-lifetime bonuses.
- Create Loyalty Plans: Give longtime customers incentives to repeat business by offering loyalty plans with long-term bonuses, discounts, and early products. Payments from such customers can be pre-authorized so that you get paid on time, every time.
- Use Penalties: Penalize late-paying customers to incentivize timely payments.
- Invoice Correctly: Make sure that the invoice is correct and sent to the right department to avoid late payments. A mistake in one invoice may also delay other payments from the same company.
- Monitor Receivables: Keep an eye on your receivables every week and follow up with reminders or phone calls if necessary.
- Use Financial Calculators: On our platform, multiple calculators can help you gauge the effectiveness of your credit and collection policies.
#6 Screen Customers
Don’t extend credit to customers without conducting credit, background, and reference checks. If their credit is questionable, then they may not pay on time. If you must serve a customer that doesn’t pass all the checks, then ask for a deposit before you work with them. Pre-authorized payments or post-dated checks can help reduce your risk. Consider extending credit with a high-interest rate to clients with poor credit.
#7 Outsource Your A/R Cycle
Even if you adopt the best practices, you may face delinquent accounts. Training an in-house collection department can take time. It may also not be cost-effective. Such resources are better spent on enhancing your business. Sometimes, it takes years of experience to identify red flags. Instead of wasting your resources, outsource your A/R cycle to a team of professionals.
At Summit A*R, we offer pre-collection services to many industries. You can leave the busy-work for us. We will represent your company professionally with no complaints from your customers. We’re proud to be rated A+ by the Better Business Bureau (BBB). It reinforces our no-complaint policy. This coveted rating is only given to businesses that provide excellent customer service and minimize complaints.
#8 Partner with The Right Collection Agency
Many businesses write off debt after they fail to recover payment from delinquent customers to avoid wasting time and energy. This can be ill-advised. You completed your end of the bargain and deserve to be paid.
An excellent way to boost your cash flow is to partner with a debt collection agency that gets the job done. We have the credit collection services commercial enterprises love because we boast twice the national average recovery rate and have recovered some particularly difficult debts over the years.
With over two decades in the business, we have perfected the collections process. Let us recover your unpaid revenue and boost your cash flow. We pledge to do so without adopting aggressive or unethical tactics. Our diplomatic approach to debt collection will help preserve your reputation and your valuable relationships
At Summit A*R, we count ourselves successful when your business prospers – especially in this unpredictable business climate. So, get in touch with us today and get back in the black. With our professional help, you can recover your revenue and boost your cash flow.
Categorised in: Our Blog
This post was written by Summit A•R