accounts receivable

5 ideas to optimize your cash flow

Having sufficient cash flow is a major concern for just about any company. Paying and getting paid are basic processes of all business activity, and these processes can be optimized.

Even though you really have no control over whether or not you get paid, you can take effective steps to ensure that you receive payments in a timely fashion. Reducing the time it takes for your customers to pay is crucial in improving your cash flow, but it’s not easy to do—especially knowing that 4 invoices out of 10 will not get paid on time. There are things other than decreasing payment time that can be done to optimize your cash flow.

5 tips to optimize your cash flow

  • Make it easier for your customers to pay: It’s rarely a pleasant job, so you might as well simplify it for them. Let them choose how they want to receive their invoices: by regular mail, email, portal, SMS, EDI, etc. With a portal, for example, your customers can access payment information at any time, without having to contact you. It’s practical in cases where they’ve lost their bill. And they’ll have access to their payment history, which makes disputes less likely. Lastly, by giving your customers the opportunity to pay online directly through the portal, you’ll get paid faster.
  • Adjust payment deadlines: If your customers have 45 days to pay but most of your suppliers require payment within 30 days, you’re risking cash flow issues. By aligning your customers’ payment deadlines with those of your suppliers, you can balance your disbursements and expenditures— as long as your customers meet their payment deadlines!Another way to improve cash flow is to reward prompt payment and have consequences for paying late.
    Keep in mind that you can negotiate discounts with your suppliers for your advance payments. Each little thing can make a difference!
  • Track late payments: The longer you wait, the greater the chance you will not receive payment. In a US study by Atradius, 2% of the total value of domestic, and 16% of the total value of foreign B2B invoices, were reported to be still outstanding after 90 days past due! With that in mind, it’s simple to understand that an unpaid bill could easily turn into bad debt if fast action isn’t taken.Unless there was an oversight, there’s surely a reason why your customer hasn’t paid yet. Whether it’s because they lost the invoice, the information is wrong, or the payment method is too complicated, you can take action. So be proactive and contact the customer as soon as a payment becomes overdue.If it’s a cash flow problem on the customer’s part, why not offer the opportunity to pay in instalments: it’s better to get the money gradually than not at all! But in order to do so, you need to ensure that the arrangement terms are in writing, that both parties have signed, and that they adhere to the terms.
  • Reduce costs by optimizing your processes: You can realize substantial long-term savings on your mailing costs by automating printing and mailing, for example. Or you could increasingly offer electronic invoices to your customers. By cutting mail and paper production, you’ll save money on your processes, but most of all, you can save lots of time. And you’ll likely get paid more quickly.
  • Keep an overall view of your accounts: By optimizing your processes, you’ll have a better handle on how much money is coming in and going out. So when a late payment occurs, you’ll be able to detect it without delay. Again, you’re assuring the reliability of the data in your records: the status of your accounts receivable, your billing data, your customer contact information, and so on.
    Invoices won’t be sent to the wrong address and orders will have all of the right information. This means considerable time savings that will also impact the amount of time it takes your customers to pay!

At Objectif Lune, we can help you put processes in place to optimize your accounts receivable and improve your cash flow: whether it be to automate your mailings, retrieve data or make your systems more compatible, we can help. Contact one of our advisors to find out more.