Managing Receivables to Ensure a Healthy Cash Flow

Managing receivables is vital to the success of any business. When there is a constant stream of revenue, businesses can make payroll, meet overhead expenses, and even make plans to expand their operations. Mounting unpaid receivables can cause cash flow to flip upside down, and suddenly those liabilities on the balance sheet threaten to overshadow your revenue. Fortunately, there are a few ways to handle receivables to ensure constant revenue.

Down Payments

The idea of down payments makes a number of business owners cringe, but the practice is far from uncommon. Large orders or contracts usually require customers to pay a small part of the balance upfront before anything is delivered. In fact, managing receivables with a down payment policy ensures customers will settle the remainder of the balance on their accounts. As always, it is a good practice to be transparent about this policy before sales are made.

Late Fees

One of the biggest reasons why businesses experience cash flow issues is that customers aren’t always prompt with payments. A lack of payment could cause customer accounts to age out and then collections need to be performed, which can be a hassle for all parties involved. Instituting a policy of late fees can greatly reduce the need for collections, and get customers to pay before the aging window on the invoice closes. No one likes to pay more than they need to, and customers pay much closer attention to their own unsettled accounts when they know they’ll be charged extra if they wait too long. It is important to note that if you decide to use late fees, there must be signs in your business and a clear announcement to that effect on your invoices. Customers should know and understand your late fee policies before a transaction is finalized.

Managing Receivables with Factoring

Managing receivables with factoring services is a painless way of ensuring a healthy cash flow without having to employ draconian policies. Receivables are submitted for factoring services and are then converted to cash. Businesses can use factoring services to receive funds in a little as one business day. With such a fast turnaround, there is no need to explain how late fees work or ask for down payments. Using factoring services to keep receivables under control allows business owners to maintain a strong cash flow, make payroll, and take advantage of opportunities for growth.

New Century Financial is a leader in factoring services. Contact our offices today to learn more about factoring, and how we can help boost your company’s cash flow.