How to Improve Cash Collections and Manage Cash Payments
How to Improve Cash Collections and Manage Cash Payments
To get your business worry-free in terms of cash position, you should encourage your customers to pay you as soon as possible. Here are some tips to increase your cash collections:
* Offer discounts to customers who pay you before due dates. This will really encourage them to pay early as they would be able to save money
.* Ask customers to make down payments when they order. This will also lessen your exposure in case something happens to your customer's business that would prevent him from paying his obligation to you on time.
* Establish a customer credit policy that will determine credit limits and apply it consistently. If you have a business policy, it would be very difficult for your client to insist exemption from this policy.
* Mark down slow-moving inventory to convert to cash quickly
.* Monitor receivables regularly by identifying those that are about to become due and those that have become overdue. These items require immediate action.
On the other hand, your objective in managing cash payments is to delay them as long as possible. Here are some tips that you can apply:
* Pay on the due date, not earlier. If a payment is due in 30 days, do not pay in 15 days.
* Use bank checks instead of cash on the due date unless your supplier requires otherwise.
* Establish a track record with your suppliers so that you could request delays in payments in the future, if your business needs it, without them losing their trust in you.
* Carefully evaluate your supplier's offers of discounts for earlier payments. You could sometimes save a great deal if you take advantage of discounts.
* Negotiate for flexible payment terms. Sometimes it is better to pay a little extra on price if you could stretch your payment terms as long as possible.