5 ways to improve cash flow using your Accounting Software
19 October 2016 03: 35 AM By Intact Software In Sage Alternative 0
As today’s tough credit environment continues it is important to keep your cash flow in focus. Cash shortages can prevent you from meeting your financial obligations and make it difficult for you to plan for the future and expand your business.
Here are some simple things you can do to improve your cash flow and how your accounting software can help…
It is very easy to get caught up in the running of your business that you can neglect the cash flowing into your business. If you don’t already have the right procedures in place, start billing your customers on a regular basis. It is good practice to bill your customers promptly. The sooner you send out invoices, the sooner you are likely to get paid. With options such as emailing invoices and statements available in most accounts packages, you have no excuse not to send out your invoices immediately goods are dispatched. This will also save you money on postage stamps.
In order to improve the cash flowing into your business, you need to have a good collection system in place. Questions you should ask yourself…
The above will not only have an impact on how quickly you get paid but also improve the level of customer service you are giving to your customers; which in turn can encourage them to pay on time.
Most accounts packages now include a Credit Control Manager to assist with debt collection activities. Some packages also included features such as automated Debt Chasing Letters, an option to charge interest on overdue accounts and reports such as Average Debtor Days per customer.
If you have invested time and money into selecting your accounts package, find out what features are available to assist you in improving your cash flow.
If you are having problems with cash flow, check how your customer terms balance against your supplier terms. If your average debtor day is 45 days and your average payable day is 28 days, there are 17 days that you have to float. This could mean you have to avail of additional working capital to get over the shortfall. Time should be spent evaluating customer and supplier terms and make any necessary changes. Customers who used to be good payers and received favourable payments terms in the past might not be in the same position this year.
Remember also to clearly display your terms and conditions on each invoice to avoid any confusion down the line.
If improving your cash flow is your priority, it should also be the priority of all staff members. Your staff are in contact with your customers on a regular basis so why not put staff targets in place to motivate them to chase outstanding debts? Whether or not you have a computerised system, it is also important to keep clear customer records, including a record of all letters, face-to-face or telephone conversations.
Your accounts package should be able to assist you again by having messages appear on a customer’s account e.g. alerting staff of those on ‘credit stop’ or other messages that would suggest to that staff member that payment is required.
Ensure that your payment methods are simple and clear to encourage prompt payment. Can your accounts package process direct debits? If so, do your customers know? Are your bank details clearly displayed on your invoice? If customers are paying by cheque, is it clear who to make the cheque payable to and where to send the cheque? Simple things like this can make the difference.
A healthy cash flow is vital for your business’s survival so the key to collecting any debt is to act quickly. Don't allow too much time to pass without notifying your customers that credit terms have been broken. Remember that you want to retain these individuals as customers, so treat them with respect.
Why not check out: 10 more must-have EPOS features for your trade counter operation
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