Learn something new every day
More Info... by email
Making improvements to company cash flow is important to the overall health of the business. Even large companies with plenty of assets on hand want to manage their obligations through a steady influx of cash from accounts receivables rather than other sources. There are actually several ways to go about improving company cash flow, with most focusing on organization and efficiency on your end.
One of the first issues to consider if you want to improve company cash flow is to look at the payment terms and conditions you extend to your clients. While 30 days is normally the minimum terms, there are companies that go with 20-day terms, meaning the invoice is considered past due if the payment is not tendered within 20 days of the invoice date. In addition, more and more companies are imposing small penalties for late payments, usually one to two percent of the face value of the invoice. Adding this provision to the terms and making sure customers are aware of the changes may motivate them to remit payments sooner, which in turn expedites your cash flow.
Another type of incentive to improve company cash flow involves offering some type of small discount if the invoice is paid within a specified period of time. For example, your payment terms may be the standard 30 days, but by promising the customer a two or three percent discount on next month’s invoice may be just what they need to issue a payment sooner rather than later. The end result is that you receive payments a week or two sooner than usual, and can make good use of that money to settle obligations to your vendors and suppliers.
Sending out invoices in a timely manner is also key to improving company cash flow. Ideally, invoices are mailed through the post or electronically the same day that they are completed and approved. Taking several days to mail completed invoices will normally not have a huge effect on customers, but every day you delay mailing those invoices, that is one more 24-hour period that you delay the receipt of a payment on the invoices. Move them out as quickly a possible, and you increase the chances of receiving payments faster.
One final tip for improving company cash flow is to understand the payment policies of your larger customers. It is not unusual for many corporations to only cut checks for payments on specific dates of the month. This means that if your invoice arrives the day after payments are normally approved and mailed, the invoice will languish until next week, two weeks, or even longer. If at all possible, time the release of your invoices to high-profile clients so they are received a few business days before that cut-off period, making it possible to get into the next round of payments issued and avoid being scheduled for payment at a later date.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!