Five Tried-And-Tested Ways To Collect Receivables Faster and Improve Cashflow?

Five Tried-And-Tested Ways To Collect Receivables Faster and Improve Cashflow?
Five Tried-And-Tested Ways To Collect Receivables Faster and Improve Cashflow?

This is an exclusive Guest Blog by Mr Rohit Arora, CEO & Co-Founder, Biz2Credit & Biz2X

Numerous factors contribute to a successful business, but cash flow keeps it operating. Having sufficient cash flow allows you to continue expanding, either to buy your company’s premises rather than renting them or if you want to improve your company’s technology and need funds to lease equipment. Even if your business is growing and getting better all the time, bad accounts receivable management can cause cash flow problems that can slow or stop growth.

Despite several successful business transactions, if your clients are late with their payments, you may continue to have cash flow problems. Businesses that efficiently manage their accounts receivable have a systematic method for collecting accounts receivable as well as tactics for identifying potential cash flow concerns and managing them before they become hindrance in the growth of your organization. 

If you’re struggling to sustain cash flow and need to make changes right now, here are five established solutions you can start adopting right away.

  1. Establish assertive terms for payment.

Provide written payment procedures to the stakeholders at the beginning of any new engagement. Include it as a component of the onboarding process. In this manner, clients cannot say they misunderstood the payment conditions or were taken aback by them. Similarly, while submitting an invoice, reiterate the payment terms. Periodic reminders make you and your customers responsible for any late payments and clear up any confusion about payment obligations.

  1. Discounts on early payments

Offering a discount for advanced payment enables businesses to encourage clients to pay in full upfront. This sort of discount is industry-specific. If you’re in a low-margin sector, even a 2% discount might add up to a significant amount of money for your customer. Where a firm can afford it, giving and promoting early payment is critical and may significantly help with cash flow. Experts in banking or your industry can help you figure out if this is a realistic option for your business.

Another effective technique to increase the cash flow is to provide discounts in exchange for payment of past-due invoices. Offering even a slight discount in such circumstances can make clearing past payments very lucrative. When delinquent consumers think they are receiving a bargain, they may become more prompt in making payments. The most important thing is to avoid making these discounts for late payments a permanent policy for customers who would benefit from the lower rate (while delaying payments to improve their own bottom lines).

  1. Issue your invoices promptly.

It is not atypical for businesses to charge their clients all at once at the end of the month. According to various management studies, the longer receivables remain uncollected, the less likely they are to be collected at all. As a result, if you are aware of any past-due receivables that can move swiftly, your company will have the best chance of collection. If you’re experiencing cash flow issues, you might want to explore speeding up your billing process. Send out invoices as soon as the task is completed and the products are delivered. As a result, your clients will receive their invoices faster, which mean you will be remunerated sooner. Now, bear in mind that this approach will require you to add prompt payment discounts. If your customers are also businesses, they’re probably going through the same process of extending their due accounts payable as far as they can and need an incentive.

  1. Change the Payment Terms

By shortening payment terms, a business can position itself for speedier payment. Consider reducing the 30-day payment term for new clients to due upon delivery. Changing payment conditions may annoy customers. Tell them why you think it’s important to change the policy to get through a tough financial situation.

  1. Reduce your accounts payable.

Keep an eye out for spikes in accounts payable (your bills) while evaluating your cash flow statement. Rather than shortening the time it takes clients to pay you, you want to identify ways to extend the timetable for accounts payable for you while keeping money in the bank. Schedule your bill payments on the day before they are due. The vendors and credit card firms anticipate it. Your objective is to get paid as soon as feasible and to keep your cash for as long as possible without jeopardising your credit or reputation. Don’t attempt to avoid paying your payments; don’t pay them a month early if you don’t have to.

Wrapping Up 

In today’s challenging economic times, managing cash flow is more important than ever before. Accounts Receivable are major part of every company’s balance sheet. They impact the financial health of small businesses (and big ones, too). Whether you are trying to pay off your own debts or applying for a small business loan to expand, make it a point to manage your receivables wisely. 

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