The small-sized businesses generally fail due to the cash-flow problems or negative cash-flow. These problems are mainly caused by the accounts receivable. Accounts receivable are basically all those payments that the business has to receive by its customers for the services that it has rendered or the goods which have been delivered.
It is very simple to understand that a business will not be able to function smoothly if there is a large gap between the amounts to be paid and those to be received. For all the daily business operations to take place, necessary finances are required, which comes from the payments by the customer.
In any nature and size of the business, the employees, suppliers, and other concerned parties have to be paid on time for the functioning of the business. The sales made and profit target achieved is not enough for a business to be successful, timely payoff and smooth functioning of the business is more important.
Both the profit and smooth working shall go hand in hand to achieve long term success. The accounts receivable problems solutions shall be formulated by the businesses, especially the small sized ones, to sustain their business and guarantee success.
The small-sized businesses should minimize the credit providing facility and ensure fixed payments at the time of delivery of goods and services. This strategy will get the business started at a better place, and then the company can have more flexible policies with regards to credit. So after building strong relationships with the customers, the companies can focus on the receivables.
The credibility of the customer cannot be known to the companies at the first meeting, accurate investigation about the customer and its financial reputation should be done. The company should ensure reliability while providing credit to its customers.
Credit Policy Limitations
The companies should enforce credit limitation policies to avoid future ambiguities and conflicts. There have been many instances where the customers take undue advantage of the facilities provided by the seller. The sellers end up losing time, effort, and money because of extending credit facilities to one customer for many times.
The amount due to the customers piles up, and this hinders the business processes of the sellers. Hence the necessary policies to limit credit facilitation should be enforced to avoid such issues.
Improved Invoicing Process
The small-sized companies should pay close attention to the invoicing process. The invoicing process holds high importance when it comes to receivable solutions. The invoicing process should fulfill the following requirements:
- The invoices to have all the necessary terms and condition included apart from the other details.
- The invoices should be very accurate and easy to understand.
- The invoice should be sent out right after the deal is closed.
The invoicing process with the above characteristics will ensure timely payments that will lead to a balance between the inflows and outflows.
Encourage Early Payments
There are several problems faced by the sellers due to cash flow concerns. These problems are caused by the delayed payments which we already know. The companies should solve this problem by encouraging early payment by providing offers and discounts to the customers for the same. This will speed up the collection process and help the company maintain a positive cash-flow.
Making the customers happy and satisfied with the services and goods provided should be the ultimate goal of the business. When the requirements and desires of the customers are fulfilled, a bond is created between the seller and the customer, which should be maintained for long term benefits. Focusing on building and maintaining a healthy relationship with the customer is the best way to avoid unnecessary confusion and conflicts and to have mutual benefits in the future as well.
Improve the Collection Process
There are many ways a company can use to improve its collection process. Atomizing the process, selecting a team, outsourcing the process to an accounting firm, etc. any of these can be adapted to have an efficient process for payment collection Automating the process and getting the accounts receivable portal is one way to go about it which is getting popular these days as it is secure and feasible.
Facilitating the process manually by selecting the right team for it is also a traditional way of the payment collection. Outsourcing the collecting process is a tricky way, but it ensures accuracy and efficiency, however, it might be questionable when it comes to securing the information of the companies finances but can still be considered.
Therefore the above-mentioned tips are the few ways to help a business g improve its cash-flow position and guarantee success. The business owners should just know their company’s inflows and outflows and then take the necessary steps to balance the expenses and payments.