Business owners cannot overemphasise the value of the cash flow metric in their companies. Certified Public Accountants (CPA) notice that many employers take pride in their company’s profits. However, this is not evident in the state of their cash flow.
Cash flow and profits vary significantly. While the two metrics are important to the well-being of a company, cash flow is what allows a business to pay for bills and the salaries of its employees, ensuring the continued operation of the business.
It takes time to explain and analyse cash flow problems. One of the responsibilities of an accountant is to advise employers on ways they can strengthen cash flow, including cutting costs in the right departments and bargaining for more decent terms on their procurement. But the first thing that accountants tell their clients (one that is frequently ignored) concerns timely invoicing.
Invoice without Delay
Waiting to do the invoice after a sale will almost surely stall cash collection. Regrettably, the consequences are more than that:
- If you delay, the company you’re dealing with may not be able to include it in their budget to make the payment to you. You may have to wait longer to collect the money owed to you.
- The business you’re transacting with may be near bankruptcy (and you don’t know it). When you delay, you may not be paid for your invoice at all.
- Your customers could forget certain information about the job and may ask about it. This results in plenty of exchanges, which brings even more delays.
- Employers can become busy in their personal lives. If the invoice is not done and sent immediately, the customer may not be invoiced at all.
- Make sure to make invoicing your customers a routine. If they signed a work contract with you, they are presuming that they would pay for the work.
- If the invoices are recurring every month, we recommend auto-generating them by using cloud-based accounting software. The system generates the invoices automatically as scheduled and allows for quicker payments.
Improve Cash Flow thru Faster Payment
Issuing an invoice and waiting for the check to arrive by mail can mess up your cash flow. You are trying to make payments directly to your vendors but you are waiting weeks for payments from your customers to arrive. A business goes into a cash-crunch due to this common scenario.
There are a lot of web-based payment services out there that it is easy to receive payments via online bank transfers or credit card.
PayPal and Stripe are two very popular payment services used at present. You follow a simple set-up process and you are ready to charge your customers’ credit cards as soon as you give them an invoice. In addition, you can deliver invoices with a direct payment link using cloud-based accounting software.
You guarantee that you have available cash for your business when you accept payments without delay.
Be persistent in following up after you send the customer an invoice and the payment has been delayed.
It is the task of your accounting services provider to check your accounts receivable listing as often as possible. Checking your outstanding invoices and following up on overdue invoices should be made a weekly habit. Remember to mark down when your customer consents to pay and make a follow up immediately if you still have not receive any payment.
The use of cloud-based accounting software allows you to look at your accounts receivable listing wherever you are. With a click a button you can re-send the invoice to several customers or transmit statements to clients with several overdue invoices.
Be diligent and improve your invoicing system to see a dramatic improvement in your cash flow. This results in greater flexibility in your ability to pay bills, or better yet, inject money into your business again in advance, resulting in more growth.
It is imperative for every business to have access to cash anytime. The way to ensure this is an efficient invoicing process. Either create a top-notch accounting team within your company or hire professionals to do the job for you, especially if your business is just starting out or you are a small business. PJS Accounts offers accounting and other booking services individuals and companies, big and small. Allow our team to get your accounts in order, prepare financial reports, give business advice based on those reports, and train your accounting staff. Contact PJS Accountants for enquiries.