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Seven Ways to Improve Cash Flow In Your Business

Guest post by: Dan Lacy

Article Overview: Business cash flow struggles? Here are 6 ways to speed up the cash coming into your business.

Seven Ways to Improve Cash Flow In Your Business

One of the more significant challenges of owning a business is having enough cash to pay the bills. Your ability to pay your bills on time, to a large effect, is based on how successful you are in collecting your accounts receivable in a timely manner.

Companies we have worked with who had problems with collecting their accounts receivable have seen dramatic improvement when they followed these few principals. They may be just what you need to get that cash out of the bush and into your hand.

• 1. Implement a procedure in your organization where you or someone you appoint is systematically responsible for getting the invoices out in a timely manner. It does not help cash flow if the end-of-the-month billing is not mailed until the middle of the following month. Many customers take 15 to 45 days from the date they receive the invoice to make their payment. If you get your invoice out late, it just adds that much more time before you receive the money.
• 2. Always put the current date on the invoice. Many times the customers gets a number of bills and they pile up until there is cash to pay them. If your invoice is not dated, the customer assumes that they just received it and places it with the invoices just received.
• 3. Put the term of the sale on the invoice. The customer will probably not remember your verbal agreement or may have misplaced the written agreement. If there is not a reminder on the invoice of when the money is due, you always end up at the end of the line.
• 4. Establish an accountability system for follow-up on overdue accounts receivable. If someone is not in charge, believe me, no one will take the responsibility of collecting that past due money.
• 5. Have your accountant or bookkeeper prepare a written aging of accounts receivable at the end of each month, so that you know what is collected and what is outstanding. This report needs to be circulated to the appropriate people at least each month. Increase the frequency of preparing this report and distribute it weekly if the monthly method is not effective.
• 6. Depending on your industry, there is normally a standard for how your customers pay their bills. If a customer exceeds that time frame, either follow up with a nice letter or a personal phone call. There is no need to get aggressive with the first contact. In that contact, see if the customer received the invoice and if it is in their system to be paid. Flag your calendar based on their response, and follow up (if no payment) and get another commitment for payment. Follow this process until the account is paid in full or becomes 90 days old (or the date your have predetermined by your collection policy). At that point, send a letter indicating that the bill will be sent to the collection agency if arrangements are not made by a specific date (usually 10 days from your current date). If the amount is large, try to get a face to face meeting with the pay due customer. In that meeting try to work out payment terms or a trade for product or service. If that does not work, assign it to a local collection agency or attorney for collection. Courtesy and consistency have worked the best for me, maybe it will for you, too.

If, for some reason, you want to speed up collections because you need an injection of money for a specific purpose, give a freebie. In the radio business, a station could easily give a few spots away if the customer paid their current bill within 15 days when the normal is 30 or 45 days

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Article Tags: accountability system, accountant, bookkeeper, bush, cash flow, challenges, current date, dramatic improvement, due money, invoice, invoices, li li, nbsp nbsp nbsp nbsp nbsp, overdue accounts, owning a business, principals, reminder, timely manner, ul, verbal agreement



Related Forum Posts
Re: Improving Cash Flow - Thanks for your information. guide on how to avoid the problems of over trading. <-- Where is this guide? Any URL? guide on debt factoring and invoice discounting: the basics. <-- Where is this guide? Any URL? I just want to learn more about this. I am also looking for a good article on: What exactly is Cash Flow? Ways to improve cash flow at individual level and organizational level? I think it is a problem of thinking and mind sets problem. If we can change the way of spending, we can have more Cash. Robert
Improving Cash Flow - How do I improving Cash Flow? What the best way to improve it to another 100% growth YOY? Has anyone does this or achieved this using online marketing? Thanks, Roberts
Looking for creative ideas - I’m a student of Business management. I have been given a task by a local business to Improve there marketing to increase their sales, after a drop in interest in a certain service. The Business is a Local Health and leisure centre and is currently suffering from a drop in sales and interest in the adult swimming service. The Business have suffered from a drop in sales by nearly 50% in the past two years. They have asked me to create a business plan and an idea to how they can improve their marketing and increase their sales in adult swimming sessions. I am posting on here, to seek advice on any ideas that you may have about how a small leisure centre can increase sales in the adult swimming market. Any ideas would be welcome as I am currently struggling to come up with an idea that is very effective and cheap to carry out, so any ideas would be welcome. Hope I have given you enough basic info, don't hesitate to ask if you need more information. Again any ideas would be very welcome and I would appreciate your help. I will be looking forward to hearing some of your ideas. Looking for a quick reply as i have not got long to complete the task and organise my presentation to local businesses. Thanks for your time and interest.
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Re: Apologizing for my absence, and an update... - Apology accepted and thank once again for reviewing my copy of [i:3v8lr26m]Offline Cash Magic[/i:3v8lr26m] report


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