As a small-business owner, there have likely been times when you have looked at your receivables and let out a heavy sigh. Cash flow is always a sensitive subject, but it’s a sucker punch when you see that you have more outstanding than is actually in the bank. Payroll can’t wait. Your lease payment won’t wait. But, for some reason, your customers are making you wait to get paid?
Here are three strategies to help amp up the speed of cash flow and move those receivables into the “received” column.
Want to quickly shift your cash flow? Try automating payments. With the permission of your customers, you can keep credit card or bank account information on file and then initiate payment just by generating an invoice.
If you’re not ready for the level of bookkeeping software that can handle these details for you, ask your clients and customers to fill out a credit card authorization form. That way, you can instantly process payments for outstanding invoices. You also establish an understanding with your clients early in your relationship about how and when payment is due.
It's true that you will incur fees with credit cards and automated clearing house (ACH) payments, but isn't Net 6 minutes with a credit card better than Net 60 days with a check?
No matter what kind of business you run — whether you head up a general contracting company or a boutique advertising agency — there’s value in getting deposits up front. Up-front deposits confirm a client’s commitment and speed up your cash flow.
First, you will need to decide what percentage of the project should be paid in advance (25 percent to 50 percent is an average deposit amount.) The most important aspect of establishing a deposit policy is to outline both how and when deposits must be paid, and when remaining balances will come due. If you’re creating intellectual property for your clients, you might consider a clause in your contract that releases rights upon receipt of final payment. There’s nothing like a sense of urgency to inspire a speedy payment.
If you find that your customers need additional incentive to speed payments along, consider an early or on-time payment discount. Many invoicing programs (including QuickBooks) allow you to include information about such discounts directly into your invoices. By offering a reward for more desirable payment behavior, you might find that you not only improve cash flow but also cultivate a better client base. Such incentives reward you and the customer.
Each of the recommendations made here can help your company put capital where you need it — in your bank account and ready to fuel your next business need.
Insights on the top cash flow challenges business owners are facing today.
Browse All Articles »
Receive our weekly email with featured articles and valuable insights for today’s business owners.
Give us a call at 1-855-PNC-CFO5 (1-855-762-2365) or fill out our simple form and a PNC Business Banking representative will get in touch with you.
Request a Contact »
PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). This article has been prepared for general information purposes by the author who is solely responsible for its contents. The opinions expressed in these articles are those of the author and do not necessarily reflect the opinions of PNC or any of its affiliates, directors, officers or employees. This article is not intended to provide legal, tax or accounting advice or to suggest that you engage in any specific transaction, including with respect to any securities of PNC, and does not purport to be comprehensive. Under no circumstances should any information contained in the presentation, the webinar or the materials presented be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy or should it be considered legal or tax advice. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc., will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission. Banking and lending products and services, bank deposit products, and Treasury Management products and services for healthcare providers and payers are provided by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC. Lending and leasing products and services, including card services and merchant services, as well as certain other banking products and services, may require credit approval.