Five steps to improving your billing

Many a business has experienced great sales, good customer relations, even a growing market – but they’ve closed because of a lack of working cash flow.

hourglass on bills

The cash flow equation, of course, has two sides. The bottom line on cash flow is the same as always: Collect it quickly and spend it slowly.

Improving your billing procedures so you collect your receipts faster is essential to improving your cash flow.

1. Bill early and often

How often do you invoice your customers? They can’t pay you until you bill them, so bill them quickly once your product or service is delivered.

If you deliver ongoing services, establish a billing schedule. Depending on sales volume and number of transactions per customer, you may want to bill weekly or semi-monthly.

Once a month is too seldom in most cases. Just by increasing the frequency of your billing, your cash flow will improve.

2. Specify due dates

Do your invoices indicate when they are due? Many companies bill with terms like “net 30.”

A better due date would be March 15 or June 20. Specific dates help your customers know exactly when you expect to be paid.

Many computerized accounts payable systems ask for a due date. If you’ve listed one, that’s the one that will most likely be put into the system.

If you haven’t listed a specific due date, your customer gets to decide on one. That may not work to your advantage. Specific due dates also let you know exactly when to begin following up on accounts receivable balances.

3. Make those collection calls

The old adage “The squeaky wheel gets the grease” is especially true when it comes to collections.

You aren’t the only company trying to manage cash flow. Your customers may be managing their cash flow at your expense. If they have to choose which vendor to pay, you want to be at the top of the list. If they know you’ll call to ask about the payment, they’re more likely to schedule you earlier.

If they haven’t paid on time, let them know you’re paying attention and that your due dates really mean something. Your collection efforts don’t have to be nasty or unpleasant. Professional collections will improve your cash flow.

4. Offer payment options

If you don’t already, consider accepting credit cards and online payments. There are costs associated, but speeding up your collections may offset those costs. Shop around so that you get the best deal for your situation and usage levels. All of these options speed up your access to the cash.

5. Consider factoring

Factoring companies perform several functions that could help improve your cash flow. They can serve as your credit department and handle credit acceptance, credit limits, invoicing and more.

They also buy your accounts receivable for cash and charge you a percentage. While this option will cost you money, it could be a solution in some cases. Many banks offer factoring services, so you may want to start with your bank. Move carefully because the percentage can be steep.