Cash flow issues can arise for any number of reasons, but it’s always a good idea that when confronting these problems it’s best to start by taking a look at your invoicing process. Monitoring cash in the bank, payments made, missed and forgotten can be a solid way to start solving your cash flow dilemmas.
Invoice factoring is a prevalent practice for businesses of all sizes because it can reduce the gap between money out and money in–allowing business leaders to stay on top of bills while continuing to invest in and grow their companies.
Why is factoring popular among business owners? Because it’s flexible and low-risk. Factoring is a sale of assets, not a loan, meaning you won’t incur debt, and you can receive payments quickly after shipping, delivering and invoicing a customer.
If you’re looking for stress-free ways to close the gap between delivering work and receiving your pay, then invoice factoring may be a smart option. In addition to invoice factoring, some other practices can aid cash flow. We all know a business may appear to be thriving but if clients aren’t making their payments, you’ll be bearing the burden. To avoid this, we recommend the following methods:
- Offer Discounts: We’ve gone into detail about the benefits of early payment discounts before, but it’s worth bringing up again. When you offer your customers incentives, they’re more likely to pay their invoices on time or, in this case, ahead of time.
- Lay Down the Law: By penalizing late payers with interest, you are showing your clients that you don’t budge when it comes to your payment policy and will hopefully encourage them to pay any outstanding invoices to avoid the interest.
- Send Invoices Quickly: If you send your invoices immediately after you complete a service, or ship your goods, you will be at the forefront of your customer’s mind, and they’ll be less likely to put off making the payment.
- Make it Easy: Simply put, if your payment method is convenient for your clients then they’re more likely to do it quickly. Talk to your customers and find out what works for them. Is it digital? Mailing in a check? Perhaps they’d rather pay on the spot via payment apps. Finding out the best option will require a little digging on your end.
- Turn to Automation: Automating your invoice process will not only reduce mistakes, but it will save you money, and many invoicing softwares will send out reminders to your clients. Additionally, this automated process will add a little more free time to your own schedule.
- Be Specific: Whether you send out written invoices or automated, make sure you set clear terms and expectations. The standard time frame is 30 days, but if you know some of your clients are procrastinators, you can set shorter payment terms (15 days or less) so that you can guarantee your money will arrive by the 30-day mark.
Each of these suggestions, whether put into practice individually or combined, will have a positive impact on cash flow. While industry and service may vary, these techniques are sure to prove effective and will alleviate stressors that many businesses run into.
How Do They Affect Cash Flow?
All of the above techniques share a common characteristic: ease. By being firm, clear, and offering different payment options you’re making the invoicing process easy on your clients which, in turn, makes things easier for you. Figure out what works best for your business and what methods your clients are responding to and then put those plans into action. Use these strategies to fill in any gaps you may have in your invoicing practices.
Keep your cash flow steady by following our simple steps and consider invoice factoring. We can help with that, get a quote for your factoring rate instantly here.