Managing a business can be hard work — just ask anyone who owns a business. There are many day-to-day tasks, like managing employees, providing customer service, and building a marketing plan, that require your attention. However, one of the most important parts of running a business is efficiently handling payments and finding ways to increase your cash flow.
Unfortunately, this can also be where a lot of companies, especially small businesses, experience obstacles and hardships. Read on for a breakdown of how you can improve business payment processing and increase your cash flow.
What Is Cash Flow and Why Is It Important?
Cash flow refers to the movement of money in and out of a business. It includes income from sales, investments, and loans, as well as expenses like payroll, rent, and supplier payments. Positive cash flow occurs when more money is coming in than going out, while negative cash flow means that expenses exceed income.
Having consistent, positive cash flow is key to operating a successful business because it ensures that your business can meet its financial obligations, such as paying employees, suppliers, and service providers on time. Poor cash flow management can lead to missed payments, strained (or broken) relationships with vendors, and, in extreme cases, business failure.
On the other hand, having positive cash flow can help businesses invest in growth opportunities and build a financial cushion to draw on when unexpected expenses come to call. Simplifying payment processes directly impacts cash flow by removing obstacles to payment and reducing potential delays in payment.
Common Roadblocks in Making Business Payments
One of the most common roadblocks that prevent businesses from making payments is delayed payments from customers. When invoices go unpaid for extended periods, it disrupts the inflow of cash, which means your business may not have enough money at one time to make payments.
Clients may wait to make payments because of unclear payment terms or their own cash flow issues. Another challenge some businesses face is the confusion of using multiple payment methods.
Vendors often take payments through a mix of credit cards, bank transfers, and digital wallets. It can be hard to keep track of who uses what method. Additionally, high transaction fees can eat into profits, especially for small businesses.
Errors in invoicing and payment discrepancies can also cause payment delays, as mismatches in amounts or terms can cause disputes that take time to resolve. Manual processes (such as sending invoices or tracking payments by hand) can also take up valuable time and may be prone to human error. That can slow down payments even more.
How To Improve Business Payment Processing
One of the first steps to boosting cash flow for your business is through automation.
Automating your payment system reduces the need for manual invoicing, tracking, and follow-up, which minimizes human error and saves time. Automated invoicing can also guarantee that customers receive their bills on time, which can help reduce payment delays.
Another way you can improve business payment processing is to keep your incoming and outgoing cash flows in one place. For instance, ConnexPay provides you with immediate access to incoming customer funds that you can use in real-time to pay suppliers quickly, which improves your cash flow and eliminates the need for a line of credit.
Finally, set up payment reminders via email or text notifications so that customers don’t forget about upcoming or overdue payments. You may also want to offer multiple payment methods to make things extra convenient for your customers.
Tools To Improve Cash Flow
We’ve talked through a few general ways you can improve cash flow and business payments, but what are some specific changes you can make? Let’s look at a few tools you can incorporate into your business.
Accounting software like QuickBooks, Xero, or FreshBooks can automate billing, track payments, and generate financial reports, giving you a clear picture of your cash flow status at any time. These platforms also make it easy to keep an eye on overdue invoices and send payment reminders.
For companies dealing with large or complex payment processes, enterprise resource planning (ERP) systems like Oracle NetSuite can help put all of your financial activities in one place. This can help you manage payments, track inventory, and monitor cash flow.
Lastly, you might want to consider using cash flow forecasting tools. Look for apps that can help you project future cash inflows and outflows based on current data. This can help with anticipating shortfalls and making informed financial decisions.
The Bottom Line
The key to running a successful business is being able to easily make payments and increase cash flow. For many businesses, the ability to make payments is directly tied to how much cash they have coming in. To improve both of these areas, you can try automating your invoices, keeping your payments and cash flow information in one place, and setting up payment reminders for customers.
Source: Featured News articles
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