Introduction
Continuous issues with cash flow due to inconsistency in the management of accounts receivable can be detrimental to the steady development of business. Almost one-third of businesses find it challenging to meet the loan repayment, pay the vendors, or remunerate the employees. According to financial reports, nearly one-fourth of entrepreneurs decline lucrative sales or opportunities because of the insufficiency of cash flow. The fact is, sufficient cash flow is necessary for the continuous expansion of the business. Consistent cash flow is vital for up-gradation of technology, generate a steady stream of income, lease business equipment, and so forth.
Seven ways to boost the cash flow and generate business growth
1. Be proactive in your effort of invoicing and collection
Make sure that every party is on the same page of payment methods, payment deadlines, and due amounts to ensure timely payment. Also, make sure that it is easy and convenient for the clients to pay the invoices on time. The invoices should be clear, thorough, and complete. There should be no missing information that might trigger a further review and consequent delay in payment.
2. Create the A/R Aging report and estimate the art.
Take complete control of the collection efforts. You can do so by determining the current status of payment of all the receivable accounts. Create a convenient and useful account receivable aging report, which is the A/R report. This report tracks and calculates the payment status of every party.
3.Act quickly on the past-due receivables.
If you do not collect the receivables soon, then this state persists forever and becomes a problem. So, stay completely aware of all past-due receivables. Give gentle reminders to your clients to make payments on time. Meet the past-due payments quickly and avoid late payments in the future.
4. Offer an early payment discount.
Offer your clients and customers with a small but attractive discount to attract early or on-time payments. If your business can afford it, then offer discounts like a small token to collect the receivables on time.
5.Diversify the client base.
Do not go for big clients only, but establish relations with smaller clients too. If your business only has bigshot clients who payout of a 30-day window, then it is time for diversification of the client base. Focus on reaching out to new business clients irrespective of their stature in the market. Small clients tend to pay faster and ensure timely collection of receivables for your business.
6. Maximize the cash flow and make it more convenient to accept payment.
Develop new modes of receiving payment from clients and customers. If you only accept payment through checks, then it is time to diversify the mode as well. Accept all sorts of UPI payment and bank transfer. Make it easier for the client to make payment. If a client can pay from the comfort of his home in just a couple of minutes, then your cash flow will undoubtedly increase.
7. Discuss cash management tools with your bank.
Look into the full range of cash management services that banks offer to increase the cash flow and improve collections. Implement electronic payment through Automated Clearing House for quick encashing of checks. Track the accounts receivable more efficiently with the help of banking services.