You’ve just emerged from the storm that is end of another financial year. Like a lot of small businesses, it’s the first time in a while that your cash flow has been put under the microscope. If your deep dive into the books revealed a lot of hidden cash in uncollected invoices, you might be left feeling disappointed that you didn’t collect cash quicker in the last 12 months.
The question is: How can you unlock this treasure trove faster?
1. Be goal-oriented
Make it a firm goal to collect your cash quicker. Set some bold business goals to improve your Days Sales Outstanding (DSO), accounts receivable turnover ratio. You have a baseline from your last financial year reporting period. You might even be able to map a trend from past reporting periods. Collecting cash quicker will mean you have more operating capital to run your business.
2. Resource your goals
Once you’ve set your collection goals, back them with the resources to achieve them. Good credit control within your business is achieved by galvinizing your people, policies and processes. Ask youself:
- Do I need to allocate more staff time to following up late payers sooner?
- Do I need to outsource my credit control to an expert, like my bookkeeper?
- Are my terms and conditions for payment clearly stated on all my contracts and invoices?
- Do I need to automate my credit control process for better results in less time?
3. Deal with ageing invoices now
The longer a debt ages, the less chance you have of making a collection. Start the new financial year with a debtor detox—refer your oldest and largest debts to a debt collection agency and let the professionals deal with the really stubborn payers. Getting this money back into your business will boost your cash flow in the first quarter so you can do your cash forecasting with more confidence. Outsourcing this problem can kickstart your in-house debt collection process that may have stalled.
4. Install an online payment portal
You’ve just entered a new financial year and now it’s time to enter a new era of payments. Transacting online is very much the norm and expectation of consumers and business. According to IntegraPay’s State of Pay Report (2017) 39.2% of small businesses lose 8 hours a week chasing payments manually. Once companies automate payments, they save on average $15,000 annually, and experience a 30% reduction in time administering and chasing payments. And it’s easier for customers to pay you, too.
5. Prioritise customer service
Time and attention are some of the scarcest resources in society today. Spending time with your customer is not an expense – it’s an investment! The knock-on effects are seen in customer loyalty, referrals, the products or services you develop, and yes, even how they respect and respond to your invoices. Dispute resolution also comes into play here: be prepared to respond to invoice disputes quickly and fairly, so that your payment can progress. Great customer service takes time, so think about where you can save time in your business that can be re-allocated to customers.
You’ve earned the money. It’s time you enjoyed the riches.
Written by Aj Singh, Co-founder of ezyCollect, automation for accounts receivable to save you time and improve cash flow.
