One often overlooked way to improve cashflow is to optimize accounts receivable. More efficient invoice generation and processing, online payments, and identifying (and planning around) trends and seasonality can be helpful in improving cashflow for your business.
Here are 7 quick ways to optimize accounts receivable to improve cashflow.
1. Focus on Efficient Invoice Processing
Efficient invoice processing, meaning taking advantage of automation tools, utilizing electronic invoicing, and having a digital workflow, means issuing invoices is a faster, easier process, and you are more likely to get paid on time.
2. Make Sure Your Invoices And Processes are Clear and Transparent
Transparency on invoices eliminates questions and pushback. Offering detailed line items that outline services, products, and tasks including how payment and fees are structured, quantities, descriptions, and totals will promote clarity.
Additionally, payment terms, invoice numbers, and your complete contact information should be legible and prominent. If you take online payment, be sure to include a clear link.
3. Carefully Manage Credit
Before considering offering credit to clients, make sure you evaluate their creditworthiness and that terms are set for credit limits, payment schedules, and how the collection process will go (as well as other consequences).
4. Offer Online Payment Options
Online payment options typically result in quicker payments, faster resolution of late payments, and access to your funds more quickly.
Most invoicing and accounting softwares connect with bank accounts and offer bank payments, credit card payments, and PayPal integrations.
5. Monitor Aging Process
Automated alerts for unpaid invoices, regular review of invoices to be paid, and proper categorization of aged invoices will help you resolve non-payment quickly. Be sure to have a communication schedule for aging invoices, and that you’ve implemented a practice for how to escalate any issues.
6. Review Invoicing Data and Reports
Not only should your invoicing data review include accuracy checks, it should also offer trends, insights on where cost controls can be implemented, and seasonality of your business.
7. Update Your Invoice Technology
Using up-to-date invoicing software with all of the tools you need while mean easy invoice generation, duplication, and tracking, online payment options, and cashflow charts and indicators. This data will help you understand seasonality and trends in your business, and forecast around dips in cashflow.
These are just a few key steps you can take to optimize accounts receivable to improve cashflow and increase cash on hand.
