Ten ways to accelerate cash flow

In today’s tough economic climate all businesses need to pay even more close attention to ensure that cash due from customers flows in as quickly and smoothly as possible. What follows is ten key ways that cash-flow can be accelerated:

1. Send invoice as soon as possible after a product is supplied or a service is rendered, because every day you are late is at least one more day your customer will wait to pay-terms only start once they receive your bill. If it takes a week to get the bills out, on average, that’s a week’s worth of cash-flow. Also, follow up on major invoices to ensure the client has received the invoice. Invoices can often be delayed by an internal authorisation process, or just going astray.

2. Clear and professional looking invoices get taken more seriously. Make sure that they therefore contain all the information such as the correct entity name, right address etc with clear ways to pay listed.

3. Set fair and appropriate credit terms and communicate these clearly with a ‘due date’ very visible on the invoice. You may even want to set the payment expectations of new customers with a specific welcome letter.

4. Deposit all payments made immediately (especially when these are cheques or cash). The more these can get into a bank account quickly the better.

5. Offer several payment methods not just one or two -customers should never have an excuse for late payment related to your lack of convenient payment options-all customers today (small and large) need to be given choices.

6. Offer early payment discounts so long as it doesn’t swallow up all the profit. If customers are struggling, the sooner you provide the facility to partially pay, the sooner the debt is paid. If a customer exceeds their terms, you can offer cash on delivery terms until the account is back on track.

7. In order to remind customers when to pay, you need a system to let you know when they are due. A series of email/SMS messages, depending upon the time overdue with relevant wording, is often very useful.

8. A great target or key performance indicator for accounts receivables is ‘accounts receivable days’. This is not to be confused with the terms you offer customers. The ‘accounts receivable days’ is the average number of days that all customers are taking to pay you. Of course you want this to be on terms or better.

9. Use you improved cash flow practices to reduce your overdraft or “float” thus saving interest costs or giving you extra cash to spend elsewhere.

10. Aim to do as much of the above as possible online at a flexible and versatile bill presentment and payment web site (such as payswyft.com). Not only will clearly presented electronic bills arrive much quicker but research suggests that customers pay 35% quicker when they receive an online bill and can pay it online on the same web site. Sites like PaySwyft also automatically bundle many of the above steps in the technology or give an organisation a range of options to help accelerate cash-flow.

Ultimately, if you can entrench these steps into your payment strategy and operational practices you will find accounts receivables less of a hassle, resulting in greatly improved cash-flow for your business.