Receivables are not a problem for point of sale businesses, but are an ongoing concern for service based companies as most vendors do provide payment at the point of invoicing.
Depending on your invoicing processes, work may be invoiced 30 days after the work was performed, then the terms of payment is 30 to 45 days.
In this instance, businesses are getting paid 60 to 75 days after the work is performed. In the meantime, your business has incurred payroll, expenses, and more.
Speeding up the Cash Inflow Process
The goal with cash inflows is to improve the speed with which materials are converted into products to sales and then cash.
We advise clients to focus on the following techniques for improving cash inflows:
- Reduce your risk on bad debts by performing credit checks on all new non-cash customers.
- For services companies, issue invoices in advance of services performed so that payment coincides with completion of services.
- Issue invoices at the time of delivery and promptly follow up on slow payments.
- Seek deposit payments at the time orders are taken or in advance of delivery.
- Discount and sell slow moving or outdated inventory.
- Track accounts receivable weekly to identify and avoid slow-paying customers.
- Consider cash on delivery as an alternative to refusing to do business with slow-paying customers.
In addition to the above, receivable collections are improved when there is a strong connection between businesses.
Through building robust customer relationships and creating frequent touch points the likelihood of improved payments increases.
ACT and Engage
As we have consulted with clients and business owners during 2020, the steps have been the same.
We help clients assess and engage their specific circumstances and then advise clients to focus on the specific controllable areas that impact the bottom line.
One of the primary areas of focus for both us as an advisor and the client is gaining a clear view through the cash flow management process.
Our B&V CFO Advisory Services team works with business owners to ensure a rock solid accounting foundation, actionable cash flow management services, and strategic Controller and CFO advisory support to mitigate brand damage risk.
Our accounting, regulatory and financial expertise provides business owners comfort that their financial health is well handled while the owner focuses on driving the company forward.
Our Part of Your Solution
All businesses have a need for cash flow analysis and projections.
Our B&V CFO Advisory solution provides experienced Controllers and support team members with experience in cash flow analysis and establishing best practices.
Whether supporting your accounting team or serving as your outsourced accounting and finance function, we assess the issues, choose the best solution option available, transition into solving the issue and engage in the process.
Our experience has shown us that our CFO Advisory services generally represent 60 to 75% of the cost of a fuller sourced, on-site accounting controller’s salary, benefits, and bonus.
We engage our clients with a highly experienced team at a fraction of the cost of an in-sourced team.
Our dedicated CFO / Controller, Accounting Manager and support staff is always there to answer questions, provide a structured control environment to protect your assets, and focus on helping you understand and mitigate your financial and operational risk.
If you are a service-based business:
- In need of financial expertise and guidance,
- Desiring a cost effective alternative to a full time Controller / CFO
Our B&V CFO solution may be the best option. Our aim is to take care of your strategic finance and accounting needs so that you can take care of your business.
Interested in our CFO / Controller Advisory Services? Call us at 713.667.9147 and ask for Kevin Stewart or Jana Kelly to schedule a free 60-minute consultation.
About the Author
Kevin Stewart is an accounting executive within professional services, public and private growth companies.
He has 20 years of experience turning around and building accounting and finance teams to fix the sins of the past, stabilize the now and create organizations to support growth.
His deep finance, accounting and compliance expertise helps business owners focus on what they do best – run and grow the business.
As your Chief Profit Officer (CPO), he will help improve your profits by focusing and advising on the controllable financial aspects of your business.
Improving Receivables (Part 3)