Your Business Can Improve Its Cash Flow by Being Proactive
Whether your business is small, medium, or large-sized, it’s important to have good cash flow. It improves your ability to pay marginal, variable, and fixed costs. These operational expenses are important for your survival. Moreover, if you’ve been in business for a few years, have a history of profitability, a strong credit rating, a healthy cash flow, an excellent team of employees, and an opportunity for expansion, then you can grow your business.
In this situation, you may apply for a loan from a traditional lender, who will examine your books and your cash flow. Clearly, having a healthy cash flow is important for many reasons.
At Summit A*R we’ve been in the debt collection business for over 27 years and serve a variety of companies of different sizes across many industries. As an agency that specializes in the collection of outstanding consumer debt – we’ve developed a reputation as a reliable, skilled, and company. We have seen small businesses come and go. Some have grown from tiny companies into large robust and profitable operations. From our experience, we can offer some tips to help your business improve its cash flow.
#1 Follow the Right Collection Practices
Studies suggest that most invoices aren’t paid on time. However, your enterprise can take takes to collect revenue faster to improve your outstanding A/R ratio.
- Do background checks before doing business with others. Offer credit to companies with strong credit scores, a good reputation, and references.
- If you’re serving fresh businesses, then ask for a deposit or collateral. If you’re a new company, then take precautions with new customers.
- Always use watertight contracts that outline all terms and conditions to avoid misunderstandings later.
- Try to communicate on email to keep a record of your interactions. Sometimes, simple misunderstandings can be resolved this way.
- Encourage your customers to pay early by offering early payment bonuses. You can work these into the original price to avoid losing revenue.
- Discourage your customers from paying late by charging a late fee. In the unlikely event that you face a delinquent account, you may use the late fee as a bargaining chick to recover your payment.
- Always invoice on time. You can use modern invoicing software that can manage accounting, invoicing, and other things. To cut costs, you can find free versions of such software.
- Send polite but firm reminders through email, a phone call, or registered post.
- Try to befriend the A/R department of your customers to get paid faster.
- If you’re feeling frustrated, then take a breather. Avoid harassing or threatening your customers. Not only can this result in a loss in revenue, but it can damage your reputation. It may also have legal repercussions.
- Accept all forms of payments. Checks, bank transfers, credit cards, and electronic payment options can all get you paid. But encourage them to use digital payment solutions. Make sure that there’s a payment link on your invoice. This way, a late-paying customer has less time to think twice about paying you.
#2 Slash Your Operational Costs
Put your business under a microscope and examine your fixed costs. Streamline your business by minimizing unnecessary expenditures. Make sure that your employees know about this policy and avoid unwanted expenses. At the same time, find the right balance. Don’t let frugality affect company morale or your employees may be less effective.
You can use the financial calculators on our website to examine the effectiveness of your in-house collection department. Many businesses use the debt collection services at Summit A*R instead of maintaining a fulltime in-house collections department to recover revenue from customers because it makes financial sense.
#3 Partner with A Good Debt Collection Agency
Many companies don’t have enough delinquent customers to justify the cost of training and running a staff of their own collectors. This staff is usually more competent in other departments. Moreover, an in-house collection department isn’t as effective as a company of debt collection specialists.
At Summit A*R we boast a recovery rate that’s twice the national average across a wide range of industries and debt types. Our team of specialists are friendly, polite, and effective.
Some businesses that value their carefully cultivated business relationships are wary of partnering with a collection agency because of some misconceptions. At Summit A*R, we take a diplomatic and ethical approach to debt collection. We follow a P.H.D. Philosophy” (Preserve Human Dignity). This means that we treat people with respect, even when collection from other companies. After all, there are people behind every business.
Our strategy works. People respond positively when they’re treated humanely. Most debtors want to clear their debts and we show them a path using our skilled negotiation tactics. Usually, a campaign of demand letters and phone calls is enough to quickly collect your money.
However, sometimes we must take a stern approach with customers that simply don’t want to pay. Unlike your in-house collection department, we can report debtors to the three major credit bureaus. Customers usually clear their dues when they notice that their credit score is on the line.
Keep in mind that businesses have credit ratings as well. Remember the time when you were seeking financing to start your business. The bank examined your business’s credit report first. Even if businesses need funding from lenders to consider expansion or to take advantage of lucrative business opportunities, they must have a good credit score.
If a company is withholding your payment, then they’re likely to clear their debts to avoid a credit score penalty. Depending on the situation, as a shrewd commercial credit collection agency we have a variety of ways to leverage a company into paying their commercial debts.
Although we can take stern measures when required, we always operate within legal and ethical boundaries. Our commitment to preserving your reputation is evidenced by our affiliations and ratings. We’re proud to have the highly coveted A+ score by the Better Business Bureau. This score is only given to businesses that minimize complaints and resolve issues quickly and amicably.
We’re also happy to be members in good standing of ACA International and the International Association of Commercial Collectors. These prestigious organizations have been established for decades and promote strong values in the industry like ethical practices, leadership, and more.
You can visit our website to learn other ways to improve your outstanding A/R ratio. You can call us anytime to speak to a friendly and professional agent. Partner with Summit A*R and boost your cash flow.