Tips to Improve Cash Flow Through Invoicing

No matter how big or small, cash rich or cash poor, or how much or how little debt a company carries, a business simply survives on its daily bread. Daily revenue not only sustains a company and helps it pay its bills and operating costs, but it also helps a company maintain a healthy credit profile with the banks. Invoicing is a vital aspect of cash flow. Essentially, invoices are how a company bills its customers for the goods and services it provides.

Losing track of billing is a sure way to lose track of cash flow. It hurts the company in two ways: First, it creates uncertainty about how much cash is available and, secondly about where that cash is now or is coming from. An automated, consistent, and reliable invoicing system can create a big picture along with a daily snapshot of income source and available time-frame.

The following are some tips to improve cash flow from invoices:
  1. Offer discounts for early payments. To improve cash flow of any business, the customers need to pay on time. If they are not paying on time, then they need to be motivated to pay sooner. But what could you do with the cash if customers paid early? A normal payment duration is 30 days, but companies offer a 2% discount if customers pay within 10 days. You can develop a policy and offer a similar discount.
  2. Penalize late payers. As for penalizing late payers with interest, they may not always pay the interest. However, the penalty will send the message that your company is firm and serious about the payment policy. This may encourage customers to pay outstanding invoices to avoid the interest charges
  3. Estimate cash flow. Companies often face a cash flow crisis because they do not have a good grip of the future expenses versus income. They want to expand but have not planned for the expenditures. A 12-month cash flow forecast is a best practice to forecast your cash inflows and plan for expansion cash outflows. A cash flow forecast will allow you to compare sales, cash income from accounts receivable, normal expected expenses, and when growth can be internally funded.
- Pamela McDaniel, Dynavistics managing director


The full version of this article is available by clicking here.

No comments:

Post a Comment