2018-03-07 13:44:33 Pro Accounting English Explore ways to improve cash flow. Look beyond boosting revenue and see how making changes to invoice terms and restructuring loans can... https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2018/03/04104234/Accountant-Encouraging-Client-To-Boost-Cash-Flow-By-Tracking-Unpaid-Invoices.jpg Increasing Cash Flow without Boosting Revenue

Increasing Cash Flow without Boosting Revenue

1 min read

When businesses don’t have enough cash, they often think there’s just one solution: to increase revenue. While that can be a perfect solution, it’s certainly not the only answer – or even the most effective one.

Businesses need to take steps to turn their unpaid invoices into cash faster. The best approach is to eliminate outstanding invoices altogether. Talk with your clients about requiring payment up front, rather than letting their customers take a month or more to pay. If that’s not feasible for their industry, have them encourage early payments with discounts and discourage late payments with fees and interest.

Your clients also have invoices that they need to pay, and the right strategy can boost cash flow in this area, too. In some cases, that may mean taking longer to pay certain invoices. If a vendor lets your client take 60 days without charging any interest, it keeps cash in your client’s bank account for longer. If a vendor offers a 10% discount for early payment, that can also help your client save money and could boost their cash on hand. Help your clients identify the best approach based on the terms offered by their vendors. Pay attention to what your clients are paying their vendors; lower prices can also improve cash flow.

Loans also affect cash flow. To keep enough cash available, your clients may need to take out a loan or a line of credit, but they also may need to restructure existing loans. If a client is making huge payments on an installment loan, try to lower the interest rate or extend the loan’s term; these solutions lower monthly payments and keep more cash in your client’s hands. Without cash, your clients can’t cover essential expenses, but boosting revenue is just one side of the equation. If your clients are struggling with cash flow issues, help them find ways to increase their cash on hand.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

How to Handle a Cash Flow Shortage

Knowing how to handle a cash flow shortage can be crucial to…

Read more

Cash Flow Ratio Indicates a Company's Financial Health

It’s easy to see that financial statements contain a lot of data.…

Read more

What You Should Know About Canadian Businesses Refusing Cash

As an increasing number of payment methods such as cryptocurrency are developed,…

Read more