If you own a small business and are looking for effective ways to manage your cash flow, these tips will help you keep your receivables in check and ensure you avoid any shortages in revenues.
Use Electronic Invoices
You need to start with the basics and make sure that the bills you send out to your customers don’t get lost in the mail and are received by your clients. The best way to prevent lost accounts is to make use of an electronic payment tool such as PayPal or Xero to send your invoices each month out to your clients. In addition, it is a good idea to communicate the invoice due date clearly so your customers won’t have any reason for sending payment late. Most electronic payment systems enable you to send reminders to clients as an invoice due date approaches.
Offer Flexible Payment Options
One way to receive your payments when they are due is to be flexible with your payment options. Don’t stick to only one payment option. Give your clients the choice of paying through different methods such as credit card, PayPal or electronic funds transfer (EFT). These payment methods ensure safe and instant funds transfer from your clients’ bank accounts to yours, without you having to wait for extended periods of time to deposit a cheque or receive cash payments.
Set Clear Credit Terms
If you’re a small business or a start-up and want to get as much business as possible from your clients, you may be scared of chasing your customers for payments for fear of losing out on repeat transactions from them. This can be very damaging to your cash flow management, as extending too much credit can leave a huge hole in your account receivables. What you must do is set clear terms of credit and make sure each new client understands the credit terms before commencing work with your company. In addition, check the credit history of your clients to make sure they pay all their bills on time before any contract is signed.
Get an Accountant
If you’re afraid of always reminding your clients about their pending payments or too busy working in your business to chase clients, the best way to get around this is to contract a professional accountant or bookkeeper to handle all your account receivables. Professional accountants know how to handle issues that arise from miss payment, and free you up to do what you do best, run your business. This will give you more time to handle other important projects and help achieve a better cash flow position long term.
Use Invoice Discounting
This should only be used as a last resort when none of the above strategies have helped in clearing your invoices. With invoice discounting, you can get all your bills cleared quite quickly as you are essentially offering those customers that still owe you money a discount to pay all of their outstanding’s within a short period (3 days). While this may help with a quick cash injection, it will hurt your profit margin levels and is a process that should be managed carefully and only when absolutely necessary.
Follow some or all of these tips and we have no doubt you will be on your way to effectively managing your account receivables in no time. Agreed, your clients are the backbone of your business, however, you shouldn’t let payments linger for too long. Good luck!
If you’re having an issue with alot of outstanding invoices and want a quick and simple loan solution to get you through, talk to Unsecured Finance Australia about how we can help you meet your business finance needs.
