In business, it is quite possible that you can be a victim of your own success. Ask an entrepreneur that’s been around awhile for a rundown on their greatest close calls -- and just wait for the “war stories” to begin. Growing, successful businesses with rock solid P&Ls can suffer – sometimes to the brink of near-catastrophe – from periodic cash flow crises. It’s one of the biggest challenges a business owner can face and yet one a cash management specialist can help solve.
Begin with your bank
It begins with the basics: the relationship you have with your bank. Time was, you opened a business checking account, used carbon checks pulled from a three-ring binder and balanced the books with an “adding machine.”
Of course, you’re much more sophisticated than that today – but have you really researched the many tools now freely available from your more-than-willing-to-help financial institution? Automated transfers, zero balance accounts, excess or deficit cash sweeps; all of these cash flow systems are designed to pinch every penny for maximum profit.
Get paid faster
Most times the cure for repeated cash flow crunches can simply be a matter of better accounts payable management. A cash management specialist
can show you the benefits of Automated Clearing House (ACH) collections, lock box services and deposit reconciliation assistance. Each of these processes can help reduce settlement time, enable recurring receipts, and save time and expenses by consolidating deposits from multiple locations.
Online invoicing and electronic payments can reduce the 45 to 90 day receivable in half. You can even bill your customer more frequently for lesser amounts in an effort to spur cash flow. And best of all, high-tech transfers mean the money goes directly into your checking account. Accepting credit cards is another “get paid faster” option to consider.
If your business requires the acceptance and deposit of numerous checks from customers each day, remote deposits can be processed through an office-based PC. No more time wasted for that daily run to the bank!
Efficiently process payables
Managing the payment of vendors along with associated business expenses can require the timing and precision rivaling a tightly choreographed dance. Cash in, cash out. Repeat. Cash in, cash out. If your accounts payable department is spending too much time and effort managing the process, it may be time for a major upgrade.
A cash management specialist can offer a payables process that can handle advanced payment schedules, assigned for single or recurring payments. Technology tools can allow “pay” or “delay” decisions that are processed immediately. It’s all a part of a system that complies with the cash flow standard of “pay on time, collect quicker.”
Enhanced fraud protection
Advanced cash flow operations have an added benefit: the reduction of fraud. Tighter controls, sophisticated encryption and bogus check analytics enhance your financial security.
By simplifying and streamlining cash management systems, you gain greater control of your business capital and eliminate the cash crunches that can cripple growth.
Source: Guest Column by NerdWallet, exclusive to Farmington Bank