A/R Strategies to Boost Your Cash Flow

How to Stimulate
Your Company’s “Lifeblood”

Business magnate Richard Branson famously said, “Never take your eyes off the cash flow because it’s the lifeblood of your business.”

A healthy cash flow is critical for companies to remain operational and to facilitate growth. With sufficient cash flow, there is less worry about day-to-day expenses, staff salaries, suppliers, and other overhead costs. So, how can a business collect funds stuck in accounts receivable?

Collecting unpaid and overdue accounts can be challenging. In the US alone, 55% of all B2B invoiced sales are overdue, and 81% of businesses have experienced an increase in delayed payments.

Modern businesses can benefit from digital invoicing, prompt delivery of invoices, clear reminders and notifications, and multiple payment options. Could your company improve its cash flow by better utilizing some of these technologies?

Digital Invoicing 

Digital invoicing expedites payments and reduces delinquency. According to a study by PYMNTS.com, businesses that use digital invoicing experience a 30% reduction in late payments. If your company already uses digital invoicing, consider enhancing your current technology with additional options such as autopay or recurring payments.

Prompt Delivery of Invoices 

Examine how your company sends invoices. Timeliness and proper format matter. Stalled invoices can delay payments and negatively impact your company’s reputation. A report by Atradius shows that businesses that send invoices promptly are 1.5 times more likely to get paid on time. Aim to dispatch invoices immediately (and always within the appropriate time frame). Additionally, ensure that invoices are clear and easy to understand, further reducing the chances of disputes and delays.

Clear Reminders and Notifications 

Proactively send timely reminders and notifications. Before invoices become overdue, send advance notifications. Ensure your reminders include all necessary information, such as due dates, amounts owed, late fees, and terms and conditions. Clear and timely reminders increase your chances of being paid on time. Research indicates that companies that send reminders before the due date see a significant improvement in on-time payments.

Multiple Payment Options 

Is your company offering multiple payment options? If not, conduct online surveys to better understand your customers and identify their payment preferences. Then, work to provide the payment options best suited to your customer base.

Take into consideration generational differences. For instance, Millennials and Gen Z-ers are more likely to use digital wallets and mobile payment options, while older generations often prefer traditional methods like checks or bank transfers. Companies that provide multiple payment options see an increase in both customer satisfaction and on-time payments. 

Leveraging Technology for Better Cash Flow Management 

You can further enhance your accounts receivable processes by leveraging other technologies, as well. A/R management software can automate many invoicing and collection tasks, reducing staff workload while increasing efficiency. These software systems can send automatic reminders, track payment status, and generate reports to help you stay on top of your cash flow. Companies that use A/R automation witness a substantial reduction in days sales outstanding (DSO). 

Building Strong Customer Relationships 

Building strong relationships with your customers can also significantly improve your cash flow. Open communication and transparency help build trust and encourage timely payments. If a customer is experiencing financial difficulties, working out a payment plan can ensure that you still receive payment, even if it is over an extended period. Studies prove that businesses that maintain solid customer relationships are much more likely to receive timely payments. 

If, after reviewing these steps, your cash flow still needs improvement or certain customers remain unresponsive, seek help. BARR Credit Services can provide the assistance and guidance you need.

Sources:
Featured Image: Adobe, License Granted
Atradius
PYMNTS