As the cost of living increases, so does the cost of labor, equipment, product and anything else you need to run your business. Which means you need to improve cash flow fast. Before jumping out with a new idea or product, the first place to start is by checking to see if you’re customers are paying you on time. You may realize that a lot of your much needed cash is locked up with your current customers who are withholding your well-deserved payment.
In order to improve cash flow, you may need to change the way you go about collecting. There are some simple tweaks that you can make that will encourage your customers to pay on time. You will be surprised by how much cash you will find was in your current customers.
- Make Payment Terms Clear
As soon as you get a new customer, be sure that you provide them with a written copy of your payment terms. It’s important that you get the customers to agree to these terms so you can hold them accountable if they pay late. For all existing customers, remind them of your payment terms whenever you send out the invoice.
- Get to Know Your Customers
You should have a good idea of what your customer’s do. Include with each contact a brief description of their company. It is helpful to also document any credit or complaint history for that customer. This will let you know if they are most likely to file an invoice dispute or simply not pay.
- Don’t Give an Opportunity for Excuses
A majority of invoice disputes stem from something missing, such as a purchase order or misinformation. By including these documents on every invoice, and ensuring that it is the right document you can improve cash flow quickly. Using an accounts receivable software makes this easier by automating the invoicing process.
- Send Invoices On Time
Haphazardly sending invoices when you have the chance is a surefire way to get paid late. Having a set date for invoices to go out is extremely helpful to customers. If they have a date on their calendar, they will be able to plan ahead and make sure they have the funds to pay the invoice.
- Manage Data Effectively
People can come and go, which is why you need to be sure that you are up to date on all the information on your customers. This is where step two can come in handy. Make sure you have the correct contact information to send the invoices, or else it will go to someone who can do nothing about it. Also, be sure that you keep track of building moves or new employees in case you need to change the address of where and who you send to.
In order to improve cash flow, sometimes you have to go the extra mile. You may be thinking, “where do I find the time for that?”, which is where accounts receivable automation comes in handy. It can automatically send out invoices, update contact information entered into your ERP or business software and ensure that the correct documents are attached to invoices. By freeing up the time spent on these manual tasks, you can focus more time on getting paid and improving cash flow.