en_SG Managing Cash Flow and Accounts Receivable: Collecting Invoices Faster https://quickbooks.intuit.com/sg/r/getting-paid/managing-cash-flow-and-accounts-receivable-collecting-invoices-faster Managing Cash Flow and Accounts Receivable: Collecting Invoices Faster

Managing Cash Flow and Accounts Receivable: Collecting Invoices Faster

“It’s All About Cash Flow”

This should appear on signs displayed in every small business. One of the key elements of running a successful company is managing its cash flow, since cash flow is what’s used to grow the business and pay employees, vendors and the owner.

Without cash, every company will eventually go out of business. Therefore, systems need to be put in place to ensure the business’ cash keeps flowing.

Unfortunately, not all businesses are able to collect payment on delivery of their product or service. When this happens, the business is owed money, its cash flow becomes stagnant and an account receivable is established.

At its most basic, a receivable is simply a short-term loan offered to a business’ client for the next 30 to 90 days. Accounts receivable are an inevitable part of business, but it’s vital that companies manage their receivables and do what they can to ensure they get paid as quickly as possible.

Billing and collecting accounts receivable in a timely manner is one of the key components to a healthy cash flow. In fact, for growing companies, accounts receivable usually increase, which puts more cash flow pressure on the company. As a result, the owner needs to have a process to monitor their receivables on at least a weekly basis.

Here are some tips to help you manage your accounts receivable and speed up your cash flow.

1. You Are Not a Bank

Giving credit to clients is a privilege, not a right, so it needs to be monitored carefully. Many small business owners are too timid about collecting money from delinquent clients. It may be a difficult topic to talk about, but if the company did the work or delivered the product, there is nothing wrong with asking to be paid.

Don’t get uncomfortable, and remember that collecting payment is needed to pay your own company’s bills.

2. People Respect Payment Requests

Clients actually respect companies that recognize the need for cash and press hard for collections. Actively seeking due payment isn’t a sign of weakness or desperation: It’s a signal of a well-run company.

If possible, don’t give credit at all to clients, but if you’re in an industry where this isn’t an option, get a deposit upfront. If this still isn’t an option, set a short time frame from the date the invoice is sent until its payment is due.

For example, you could set your payment terms as “payable upon receipt” or offer net-10 days on it, each of which may prompt immediate payment.

3. Get to First

Getting the first payment from a client is always the toughest, especially if the client is a large corporation. It is critical that the small business determines the approval path within the organization. This allows the business to match the new client’s invoice to its purchase order even before the invoice gets approved for payment.

At the start of the relationship, ask the client if there’s anything that needs to be done to be set up as a vendor in their system. Be sure to check to see if invoices can be paid electronically through direct deposit into your company’s bank account. This provides a quicker boost in cash flow by cutting down on mail transit and expediting the bank transfer.

When the first bill is sent, call the company to check if the invoice was received, and ask when it’s scheduled to be paid. Right before that date, call again to see if the payment date is the same.

Once the due date has passed and before it should have been received in the mail, ask if it was sent. Continue to follow up until the payment is made. All of this can be managed easily with electronic reminders.

4. Most Companies Want to Pay Their Bills

Clients will, in fact, appreciate these gentle reminders if they are done in a polite and respectful way. No badgering or debt-collector tactics are necessary.

Remember that clients who do not pay their bills are not clients. Instead, they are collection problems. Do not do business with these types of people or companies. Do not continue to ship products or perform services for clients who have overdue payments.

It is the best leverage for a company. When their accounts receivable is finally paid, do not go back to business as usual, as if there wasn’t an initial problem. Instead, ask for a deposit for the next order or insist they pay by credit card.

Follow this route to get accounts receivable paid on time. As a result, your company will have the cash flow to pay your employees, vendors and owners. Of course, speeding up your cash flow and managing accounts receivable is dependent on having the right information on professional invoices and utilizing reliable billing techniques.

Rate This Article