In an ideal world, businesses make profits which they invest back into the production, to be able to enhance the growth of their business.
This profit is also invested into the employees who work for the business to ensure they are rewarded, trained and motivated to constantly do better. All of this potentially works toward creating a better, bigger business.
Realistically speaking, however, with the constant lack of liquidity, recessions and deteriorating economic conditions, businesses aren’t really paid on time and cash flow comes to a halt, hurting the entire business process.
What can you do to resolve the issue and motivate your clients to pay on time to keep the cash flow coming? Here are some tips that might help you maintain your cash flows.
Set out Payment Terms and Conditions
Setting out a written policy for your business’s payment terms and conditions is imperative. You can include this in your contracts, credit form and even on your invoices to make sure your clients are made aware of the policy.
Setting out a written payment policy ensures that the company has something to fall back on in case your clients start making excuses about lack of clarity.
It helps maintain a clear approach regarding your business’s policies, and the clients know exactly what is expected of them, so they can make their payments as and when required.
Offer Incentives to Clients Who Pay On Time
This is a common strategy implemented by companies across the globe to motivate clients to make timely payments. You could start by offering discounts to clients who pay early, or on time.
This would give them incentives to make their payments and in turn, keep your cash flows coming in strong. This will also help maintain customer loyalty, which is quite beneficial in the long run and is bound to increase sales and revenues.
Attach Invoices to the Goods Dispatched
Instead of sending invoices at the start or end of each month, try to send them out along with the delivery of the goods or when the services are provided. Businesses are often burdened with multiple invoices and bills toward the end of the month, and having the goods possessed or having availed the services a few weeks prior to the arrival of the invoice, tends to allow payments to be neglected.
If invoices are sent out directly with the goods or services, they are more likely to be settled in time, allowing your cash flows to be constantly flowing into your business’ account.
Speak to Your Clients about Payment
Keep in contact with your clients regarding the payments they owe you. Make sure you don’t hover though, because that might lead you to lose clients, but maintaining contact will ensure that any disputes or questions are clarified sooner rather than later, and that clients don’t forget about making your payments in due time.
Invest in Efficient IT Systems
As a business, make sure you invest in the right kind of database and software to manage your cash flows. This will help make sure you always have a clear picture of the finances, so you can implement the most suitable strategies going forward.
If you rely on the pre-installed spreadsheets, try to switch to more specialized accounting software which is much more advanced, accurate and proficient in being of assistance with cash flow management.
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