The businesses often focus on achieving the sales targets and increasing profit, the concentration of getting the payments of those sales is lost once the deal is closed. The increasing profits and getting more sales is very significant, but getting the payments timely is also one of the most important aspects of having a successful business. It is very vital for any business to have a positive cash- flow that helps in managing the daily business operations. Having improved profits and increasing sales does not mean positive cash flow.
A positive cash-flow refers to a position of business where the receivables are in balance with the payable. This is a very simple concept to understand there will be a negative impact if the receivable will not be procured on time, as the payments which are to be given to the employees and the suppliers will be delayed. The payments should be received on time as the daily operations and investment.
The accounts receivable problems solutions should be taken by all the businesses to improve their financial health. There are several tips and steps which can be followed by the companies for increasing profits as well as positive cash-flow, some of the tips are listed below:-
1. Managing the accounts
The first step that should be taken is analyzing and understanding where the business is lacking in terms of maintaining a positive cash-flow. For that to happen, the companies should run a detailed analysis of the accounts payable as well as accounts receivables. The detailed analysis will make it easy for the company to understand which area needs to be paid more attention to. Mostly the receivables are the major reason for negative cash-flow due to the delayed payments by the customers.
Mostly the companies jump to solutions before even examining the problem in an accurate way. Thus the companies should discover the reasons for delayed payments before starting anything else. This can be done by the following steps:-
- Examine the policies of similar companies which are of the same industry
- Develop performance indicators to keep track of all the records relating to the payments
- Re-evaluate your policies and customers
After the problem is discovered, measures for receivable solutions should be taken.
2. Atomizing the process
Digitizing the accounting process, especially the accounts receivables, will be very beneficial. The companies should invest in automation, which will solve most of the issues with accounts receivables. The automation will help the business to generate accurate and speedy invoices which will be automatically sent to the customers. The manual billing process is often very time consuming and is more prone to errors. When the invoices and
The reminders will be sent automatically to the customer in a timely fashion, and with the maximum accuracy rate, then the payment will also be received on time. The accounts receivable portal can be installed, which will keep track of all the details and ensure accuracy and minim rate of errors. Hence the companies should invest in automation of their receivable process for positive cash flow.
Investing in cash-flow businesses are often resistant in investing in the aspects which might not look very important but hold a very significant role in the function of the whole business. Investing time and money for improving the companies cash- flow position is a long term investment with long term benefits. Digitizing the accounts receivable processes, training the employees, hiring skilled employees, etc. are to be included in the investment.
3. Managing for future accounts
Managing all the accounts-the the payable and the receivable should be given more priority. Keeping track of the expenses are equally important as keeping track of money to be received. As business is all about expense and revenue, managing these is the basic duty of the owners and the management. Regular evaluation of performance with regards to these accounts must be done, and strategies and policies should be formulated and then changed accordingly to further strengthen both the accounts and their processes. The accounts receivable and payable are the Pillars of finance in a business.
Investing in these will just make the business stand stronger and achieve its goals. The small to medium-sized companies struggle the most due to the cash-flow problem, and the large-sized business finds it difficult to maintain the cash- flow position, so irrespective of the nature and size of the business it’s essential to maintain the proper financial health of the business to grow, expand as well as sustain. The cash-flow is directly related to the balance between the accounts payable and receivables, lesser the gap more positive will be the cash-slow position. Thus these accounts should be managed it the most accurate fashion to ensure optimum output in terms of maintaining the cash-flow position.