In business, maintaining healthy working capital and cash is an imperative step for smooth and consistent operations. The trust that vendors vest with a business depends on prompt payments that have to be funded through sales receipts. This invariably means that any delay in accounts receivable will topple the balance for a while, and repetitions of late payments or cash crunch situations will balloon to bigger problems that will become difficult to manage.
A strong revenue also cannot guarantee a healthy cash flow unless practices are in place to use managed accounts receivable. There are several ways to control cash flow, which include expense management, like keeping expenses beyond COGS under control or decreasing the days to be outstanding or DSO so that revenue is not limited to accruals only and is translated to cash inflows. Only then will meeting sundry expenses not cause chaos in the accounts section.
To achieve a healthy cash flow, meticulous and calculated steps like budgeting, tracking expenses, exploring avenues to nudge customers to pay in cash, and taking less credit with discounts for immediate payments are taken by business owners. Building a cash reserve whenever the inflows are in green will help fund unexpected expenses without putting a financial strain on the business. Negotiating extended payment terms with vendors is one step that increases cash flow; however, it will increase the debt over time. Here are some ways you can use technology to amp up your AR game:
Send Automated Messages
Most customers pay up in time if they get gentle reminders in time so that they do not miss out on payments owing to their busy schedules. However, sending an individual email to every customer is a heavy task and requires a dedicated team. Rather than sending individual emails, automated accounts receivable platforms can send multiple messages without errors in terms of correct address, name, amount, and due date. These reminders help consumers pay on time and keep up their goodwill with you for long-term relationships.
Brownie Points
Customers who pay in time without nudging or who pay in whole without an extended credit line need to be rewarded to keep the trend going. The AR platform will automatically scan the customers who have been maintaining the standard and paying upfront or within time. Discount offers and cashback offers can be extended to such customers so that the business can thank them for their patronage and understanding.
Dashboards & Data Analytics
The AR platforms have real-time data on the dashboard that is accessible to everyone on the team. Depending on the aging analysis, the business can take corrective measures for the future for customers who repeatedly delay their payments and set a pattern. The data also analyzes future expected inflows, which allows the business to plan its expenses as much as possible.
Conclusion:
Business process automation can be a holistic one or a piecemeal structure. It depends on the requirements of the company and their current budget. But over time it is sensible to automate critical processes like accounts receivable.
