In the first part of this blog we talked about the main components of good cash-flow management.
The components were: forecasting your cash-flow, evaluating terms with your trading partners and having a good system to enforce payment discipline from your customers. They are essential to improving your cash-flow and making your balance sheet healthier.
Here are three best practices that help you achieve a stronger balance sheet:
1. Full Visibility
In order to have full visibility you must be able to see if your invoices have been sent, received, read, queried and resolved. A real-time tracking system allows you to trace all invoices from the moment they’re sent up to the time that payment is received. This means that you can deal with any invoice issues or queries as they arise and speed up the dispute resolution process.
2. Evaluate your Payment Collection System
In order to improve your cash-flow you must know where you stand currently. Conduct an honest appraisal of your cash-flow system and the current payment process that you have in place.
Then ask yourself these questions:
– Is it an effective system that gives your customers adequate notice and reminders of payments and encourages them to pay invoices promptly?
– Do you have the infrastructure in place to deal with queries or late payments that can slow down the whole collection process and delay when you get paid?
If your current system doesn’t meet these requirements your customers will delay paying you to keep cash on their books for longer. It is those who shout the loudest that get paid the fastest.
3. Full Audit Trail
By having full visibility of your invoice status, you can create a full audit trail history that tracks all documents sent between you and your trading partners. This is an invaluable resource for tracking invoices and payments. With this transparency you can monitor who is paying you on time and who is delaying or missing payments. This allows you to negotiate better terms with your customers as you know who pays you on time and who doesn’t. You can reward those that do with discounts and take action against the customers that continuously miss payments and adversely affect your balance sheet.
See how an e-Billing solution can help your business achieve these cash-flow best practices here.