To say that things are uncertain right now regarding the economy is, in all probability, a bit of an understatement.
Inflation is at levels we haven't seen in decades. Employment costs are rising across the board. Thanks to still-ongoing issues with the fragile global supply chain, materials in all industries are more expensive than ever - if you can even get them.
These issues can make it difficult for organizations to tackle one of their most important challenges: cash flow. According to one recent study, approximately 82% of all businesses fail due to poor cash flow management or a general misunderstanding of the idea.
Thankfully, this is only a hurdle if you allow it to be. Modernizing your back office processes can, among other things, help dramatically reduce the time it takes to get paid. In turn, it can help with any current or potential cash flow issues, which is an excellent position to be in.
Improving Cash Flow, One Change at a Time
By far, one of the best ways to reduce the amount of time it takes to get paid by clients and other vendors involves asking for payment deposits at the beginning of any new business relationship.
This particular method helps to accomplish a few different things all at once. For starters, if a client owes you $1,000 for a completed job, they're more likely to settle the total balance if they've already paid $250 of the bill. If they've already put forth a deposit before any work even started, they're motivated to quickly see things through to completion and less likely to delay payment.
It's also a great way to help get at least some money coming in the door all the time, so if a client does end up paying the remaining balance late, you were able to get at least part of it ahead of time.
Another option that you'll want to leverage has to do with switching to digital invoices. If you haven't already done so, understand in no uncertain terms that this is no longer a recommendation - it is a requirement.
Think about it from a purely logistical perspective. If you send an invoice to a client via USPS and it takes five business days to reach them, and then another five days pass before they act on it, and then another five days pass before you finally receive that payment check in the mail, that's 15 full days (at an absolute minimum) where your money was in limbo. A digital invoice, on the other hand, can be sent in seconds and paid just as quickly.
Not only that, but you're freeing up the valuable time of your back-office employees so they can focus on more important matters. Not only that, but many digital invoicing systems also integrate with various financial software you're likely already using. So you'll have less paperwork to keep track of on your end, and you'll be able to easily see who has paid and who hasn't (thus requiring a phone call to follow up). This will lead to more accurate financial statements, giving you a better foundation for making actionable decisions.
More Payment Options
Finally, if you want to motivate people to pay you quickly, you need to give them as many options as possible when it comes to precisely that. The easier it is for someone to take your desired step, the more likely they will take it.
Many businesses got away with accepting cash or checks in the past, but those days are no more. You should also, at a minimum, accept credit and debit cards. You could even explore certain digital payment options like PayPal, Zelle, and others. Give people a chance to pay on their terms, and they're less likely to delay the process any longer than necessary.
In the end, addressing cash flow concerns is not something you "do once and forget about." It's an ongoing process that you must remain proactive about, or else economic uncertainty (not to mention client or vendor uncertainty) could exacerbate things significantly. But by asking for payment deposits, embracing digital invoices, and offering more options to pay, you can reduce the time it takes to get paid, thus improving cash flow along the way.