Maximizing Cash In: The Healthy Heart of Business
This section looks at three ways to maximize cash from sales in a business.
The first is fairly straightforward: grow revenues through all the product development, sales and marketing expertise you can master. Making sales is just the first step in the right direction.
The cash management perspective focuses on the two subsequent steps on maximizing “cash in”: making sure costumers pay you (collecting your receivables) and turning those cheques and transfers into cash in your bank account (converting cash as quickly as possible).
CASH FLOW MANAGEMENT
1. GETTING PAID
Bad debt and late payment can turn even good months into liquidity struggles. Receivables collection is one of the most common actions in cash management, so it is a good place to start.
2. Basic Collections Practices
ROBERTKA Business Solutions receivable specialists recommend a 20-day cycle, where you take action every 20 days:
- Day 1: Issue an invoice when you deliver the goods or complete the service. The invoice should set payment terms as net 30 days.
- Day 20: Ten days before the receivable is due, have sales staff call the customer. This doubles as a service call. Make sure the product mate expectations, because sometimes payment is delayed if customers are unhappy. You can now fix any problem before due date. Otherwise make sure the invoice was received and terms are understood.
- Day 40: Ten days after the due date, call again if the bill remains unpaid. Found out what is causing the delay. If the problem is real, you can deal with it. If you’re being stalled you can escalate the request.
Stay tuned for step 3
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