What if you were waiting on receivables for 60, 90 or 120 days and had a hard time making payroll? This is a real challenge for many businesses and particularly ones who bill for services rendered. Companies are often trying to wait as long as they can to pay so that their cash is stretched a little further. But that’s not any benefit to you.
Waiting on cash coming in can be one of the most stressful things for a business owner, but you’re in luck because we have some tips to help you improve your cash flow.
Review Your Terms
What are the terms that you currently offer your accounts? Is it the standard net30? If so, have you thought of offering 2% net15? This would allow you to collect on your invoice 15 days sooner with a 2% discount to the invoice. It’s a great way to incentivise your accounts while also building a stronger relationship with them.
For companies working on a project by project basis, do you ask for a portion of payment up front? Asking for a set amount or percentage up front can help float you through the project until you receive final payment from the account. These are two small terms changes that can have a big impact on improving cash flow.
Allow Options for Payment
Do you only offer one way for your accounts to pay? Allowing your accounts to pay a couple different ways can help make paying their invoice easier and hopefully allow them to settle up sooner. Options such as credit card payments or online payments can be more convenient for some accounts, so allowing them the opportunity to pay a different way can help reduce your receivables period.
For businesses working on a month by month retainer basis, allowing your accounts to set up ACH payments can be a life saver for you! This nearly guarantees receivables are settled up immediately or whenever the account selects their withdrawal date to happen. Talk to your banker if they haven’t already suggested this for your business!
If you have any questions about improving your cash flow, so that you can focus on building your business instead of chasing down money, reach out to any of our business bankers.