When customers drag out their payments this puts a lot of pressure on the business because it limits their cash flow. Positive cash flow is necessary for companies to continue operations and be successful. Slow paying customers can quickly turn positive cash flow to negative cash flow. It’s important for the business owner to have policies in place to ensure everything possible is being done so that customers will pay within agreed to terms.
First, provide your goods or service to customers that have a good credit history. Order a credit report from a reputable credit reporting company. This information will usually include a credit score, a recommended dollar credit amount, and payment trends. This is especially important if your customer is a privately held company, where little financial information is available. By knowing a prospect has a poor payment history you can choose not to do business with them, or demand payment on completion.
The second thing to address is to review your entire billing process. Be certain that invoices are emailed immediately after your service is rendered to the email address specified on your purchase order. Include all necessary approvals with your invoice. Then verify with your customer’s accounts payables that they have your invoice in their system to be paid. Track your open invoices on your aging and have a policy to determine when you will contact your customer about late invoices.
Following these two practices will cut down on your average day outstanding, speeding up your cash flow. If this still does not provide enough cash flow a good solution is to use invoice factoring. Invoice factoring is when you sell your accounts receivable to a factoring company for a discount to get cash. Factoring is specifically designed to let you offer terms to your customers and get the money you need to stay current on your payroll, operating expenses and grow your business.
American Receivable is helping staffing companies, manufactures, IT companies, and others keep a positive cash flow, maintain a strong customer base, and keep accurate accounting records. For 43 years our team has maintained our Top Rating by providing our clients with affordable factoring with no up front fees or hidden costs. Call today to get the money you need to grow your company.