Strategies to maximize cash flow
Though these are difficult times for small business owners, the current health crisis won't last forever, and money owed to your company is money you will need to rebuild your business when it's over. So it's a good idea to assess and refine your accounting procedures to be as efficient and consistent as possible. Here are a few tips:
Invoice frequently and accurately
Don’t wait until the end of the month or some arbitrary date. Send the bill as soon as the job, service or delivery is done.
Make it easy to pay.
Your invoices should present all the elements necessary for fast payment — including a due date, details of goods or services purchased, order number and payment options.
Review unpaid invoices regularly.
The longer an invoice is out, the less chance it will get paid.
Set clear payment terms
If your terms are net 30 days, make it clear.
Reward those who pay early, such as with a 2% discount when paid within 10 days.
Be clear with customers in advance that there may be fees for late payment.
Collect partial payment up front
For bigger or long-term projects, consider collecting half up front and half upon completion, or dividing into thirds so you get a payment up front, midway and at the end of the project.
A note about tax season
Smart planning can help minimize the impact of taxes on your cash flow and prevent unwelcome surprises when April 15 rolls around. Instead of putting off tax planning until November or December, it’s important to meet with your accountant on a regular basis to make sure you’re setting enough aside to meet your obligations. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.
Read the entire article on managing receivables on the Small Business Community.
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