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2019

Cash flow best practices

When it comes to cash flow, the faster you collect payments, the better. Money owed to your company is money not available. So it’s a good idea to assess and refine your accounting procedures to be as efficient and consistent as possible.


As you strive to manage receivables more efficiently and consistently, taking the right approach can help you maintain and even nurture your customer relationships.

Invoice frequently and accurately.

Here are some ways you can speed payment:

Invoice immediately. 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.
Send recurring invoices more frequently. If you’re billing in hourly allotments, do it twice or three times a month instead of just once so that money is always coming in.

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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 (such as credit, debit and mobile wallet).

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Review unpaid invoices regularly.
The longer an invoice is out, the less chance it will get paid.

Set payment terms

Clearly communicate and enforce your payment terms:

Establish a “net 30” schedule.
This requires that customers pay within 30 days of the date of the invoice, which can add stability to your account management.

Offer discounts.
Reward those who pay early, such as a 2% discount when paid within 10 days. This might cost a bit up front, but may provide benefits over time with improved cash flow, easier collections and customer satisfaction.

Implement penalties.
Be clear with customers in advance that there may be fees for late payment. But remain open to negotiating a late fee waiver when warranted.

Collect partial payment up front. calendar-icon

For bigger or long-term projects, break up payments into smaller amounts along the way. Two often-used strategies are collecting half upfront and half upon completion, or dividing into thirds so you get payment upfront, midway and at the end of the project.

Be proactive.

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Make a schedule.
Set aside a few hours a week to send out invoices and follow up on outstanding invoices.

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Stay organized.
Maintain an easy-to-reference record of customer purchases, contacts and communications.

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Give a key employee access.
A staffer helping with receivables will need access to customer financial records.

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Engage a bookkeeper.
Even on a part-time basis, a person with accounting knowledge can be indispensable.

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Use accounts receivable management software.
Streamline customer correspondence in one place — including history, past actions and searchability.

Plan ahead to make accounts receivable a top priority. Getting automatic cash flow projections through Business Advantage 360 can help.

Enforce your payment policy.

When a payment becomes past due, take action. The longer you wait, the less likely it is that you’ll get paid.

Be diligent.
The day an invoice becomes past due, be sure to follow up. Unpaid invoices should demand your immediate attention.

Talk person-to-person.
Emails and letters are easy to overlook or ignore. Calling your customers is a more immediate and personal approach.

Collect past-due payments.

Here are some tactful ways to approach the sensitive issue of delinquent customer payments.

Contact the customer first.
Reaching out before taking any legal action — a call, letter or email — might be all it takes. This is the easiest, most affordable way to resolve the debt.

Negotiate through mediation.
Legally, this may be the least stressful and costly way for you and your customer to reach a settlement.

Engage in arbitration.
A court-appointed representative will hear both sides and resolve the dispute.

Use a debt-collection agency or lawyer.
If the bill is large enough to offset the cost, either of these might be the most viable option.

Write off an uncollected invoice.
Come tax time, you can claim it as a bad debt.

Receivables management solutions

In addition to cash or check payments, today there are plenty of technologies, tools and resources to manage receivables more effectively. Consider contacting a small business specialist to discuss what would work best for your business.

Electronic payments

Automated Clearing House (ACH) and Electronic Funds Transfer (EFT) services ensure you get paid faster by drawing payments from customers’ bank accounts on specific dates that both parties agree on. Advantages include:

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Convenience.
Electronic payments only need to be authorized once and are then automatically deposited into your designated bank account going forward.

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Increased security.
Automatic and electronic debits are more secure and minimize human risk, mishandling and error.

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Lower costs.
ACH and EFT services deliver payments at a fraction of the cost of paper check processing.

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Faster processing.
Turn a customer check into an EFT. Take relevant information from their check and process a one-time EFT from their bank to yours, while notifying your customer.

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Credit cards.
Because credit cards are an attractive payment method for many customers, you should accept as many types of cards as possible. They may also substantially reduce the risk of non-payment since credit card providers are required to pursue delinquent accounts. Plus, the benefits — such as increased spending, customer convenience and trust — far outweigh the minimal processing fees.

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Merchant services.
A turnkey point-of-sale system makes processing payments — including electronic checks, debit cards, credit cards, gift cards and more — easier than ever. Typically, funds are available by the next business day. Find out what Bank of America Merchant Services can do for your business.

Electronic receipts

Paper receipts are fast becoming obsolete. The preferred method you should consider for offering your customers receipts is through email. Importantly, email receipts are environmentally friendly, low-cost, easier for customer recordkeeping and minimize fraud related to purchasing and returns. Receipts may also be stored in secure online clouds where they are easily accessible.

Online remote payments

Make payments as easy as possible by responding to your customers’ preferences: Whether through credit card, debit card or direct debit from a bank account, accepting online payments are essential for customer purchases by phone or through any digital device.

Get started with a Bank of America Merchant Services eCommerce Payment Gateway.

Online remote deposits

Similar to mobile check deposits for very small businesses, online remote deposit is designed for businesses frequently processing multiple checks directly from their office. Using a computer and a bank-issued scanner and software, check images are transmitted directly to a bank account, expediting the availability of funds.

Spend less time depositing checks with
Bank of America Small Business Remote Deposit Online.

ATM business deposit cards

screen-iconA business deposit card is a handy, secure tool that enables you to designate one or more employees to make ATM deposits to your business account, but not the ability to withdraw funds or access private account information.

Learn more about business deposit cards.

Cash automation and optimization

For greater integration of receivables into your accounting system, consider using an e-invoicing service. This would allow you to automate your cash-handling process, and includes electronic invoicing, check and invoice scanning, supplier communications and receiving e-payments.

 

An e-invoicing portal also would enable you to check the status of invoices in real time; make faster decisions; enhance forecasting; increase operational opportunities, efficiencies and security; provide quicker access to receivables; and boost visibility across the process to make better, more informed decisions.

 

Handle payments, invoicing and reporting with Viewpost®.

Business pro tip:
Paperless billing is a faster,
more cost-effective way
to process checks

 

Check out this Small Business Bookkeeping, Accounting, & Tax Guide from FitSmallBusiness.com.

Bank of America, N.A. provides informational materials for your discussion or review purposes only. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

 

Bank of America, N.A. Member FDIC. ©2019 Bank of America Corporation

 

 

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