One of the biggest challenges faced by businesses is cash flow, at times pressure is high when money is needed to pay wages, bills and stock or resource but delays occur when cash isn’t coming in at the same pace. There can be many reasons for cash flow problems, such as not sending out invoices timely, customers not paying them on time or simply not having the skill or resource to pro-actively manage debt owed. Below we talk about some of the things you can do to improve cash flow. Capture invoicing data immediately Before providing a service or product it is extremely important to discuss payment terms and costs up front to gain customer co-operation and agreement early on. It may be necessary to provide a contract or simply confirm payment information in a letter or digital communication. You should include the invoice terms – how long the invoice will take to produce, where it is sent, how payments will be made and by when. Failing to have this initial agreement can make settlement difficult and can even cause legal complications if the invoice is disputed later on. Keeping great records Implementing processes and procedures to record costs and maintain invoices will help you to generate invoices effectively and timely. Knowing what is owed, producing invoices quickly and ensuring they are sent swiftly will more likely result in a swift payment. Holding onto invoices, sending them without structure and not having a payment deadline in place will give the customer the impression that they are less important. Failing to chase up payments will also allow the customer to place the invoice in their post tray until a demand is received. Be proactive in invoicing The best way to encourage prompt payments is to demonstrate you are competent, helpful and assertive with your invoicing. Sending out an invoice and waiting or hoping it will be paid simply isn’t enough in some industries; it is good practice to follow an invoice up with a contact to check safe receipt and plans to pay. Contacting customers by telephone shortly after sending out an invoice will demonstrate that you are active in recovery; check the invoice has been received. Be clear and accurate in what is payable and how to pay; you can take this as an opportunity to be helpful in offering to settle the invoice during the call. Asking the process of making payments is also great information to assist in future communication, will the payment be passed to someone else? How do we speak to them? When will they receive the invoice? How long will it take them to raise payments? Deal with late and under payments promptly Keeping a diary of invoice due dates will assist in ensuring cash is coming in, a call out on the due date to request immediate settlement and if necessary speaking to someone in authority to agree the payment settlement demonstrates that the business is assertive and professional in collecting payments. When under payments or part payments are received a call to immediately address settlement will enforce the full invoice amount, eliminate and address any misunderstandings. Managing debt ledgers Leaving unpaid invoices in a pile waiting and hoping for settlement is simply not good enough in today’s financial climate. The invoice becomes weaker, the priority reduces for the customer, its value can begin to deteriorate as customers forget about it and their desire to settle it reduces. It is very possible that the customer could go out of business, they may dispute the invoice, legislation may change which could reduce the value or invalidate the invoice. Managing debt ledgers is extremely important, never think of the ledger as a pot of cash which is safe for to claim when you really need it; it is simply a pile of paper which you have failed to turn into cash and it may never turn into money. For some businesses having an invoice, debt recovery and enforcement department isn’t possible or viable; this is when outsourcing can be extremely valuable. A debt recovery company can be an extremely smart investment, with the option to hand over part or all the process from invoicing to recovering debt. Some debt recovery partners may also have flexibility to offer these services on a commission, pay per use or monthly volume inclusive package. For information on our solutions, click here.
2 Comments
8/10/2020 02:14:12 pm
Hi Admin
Reply
Leave a Reply. |