Businesses today have a substantial amount of money sitting in their accounts receivables. Accessing that money and getting it into your business is no small task, with more than 40% of invoices paid late.

We are well aware of the problems fluctuating cashflow can create in a business with a report earlier this year citing late payments as a key reason for business insolvency in Australia. 

With that in mind, let’s consider some of the ways your business could benefit by better managing your accounts receivable.

Implementing credit terms and discounts

  • Get funds back into the business faster – the sooner money is back into your business the sooner it can be re-invested;
  • Healthier cashflow – waiting times for invoice payments are reduced, leading to regular payments and better cashflow;
  • Growth opportunities – funds may be more readily available to channel into new business, employment of staff, or tendering for projects;
  • Reduce operation costs – reduce the amount of time your business spends chasing payments;
  • Reduce bad debts – reduce the number of bad debts and delinquent accounts being carried by your business.

Negotiating credit terms early

Many businesses do not implement credit terms with their customers.  They may not have the skills or experience on how to do this. Or perhaps they do not want to ‘rock the boat’ with a new customer or big piece of business.  However, getting payment terms set upfront is necessary as it will impact your business and your relationships with your customers.

Offering a discount period

The credit period is the time from when your invoice is issued to the payment due date.  By offering a discount period within this timeframe, your business has the opportunity to get cash back into the business faster. This is done by offering a percentage or price reduction to the overall cost of the invoice.

However, offering discounts should be thought through and should not impact profit margins. For example, you may offer a 2% discount if your client pays within ten days.  But the cost to your business of that discount will be different if the bill is paid at 10, 14, 20 days, or any number of days.  So, make sure it’s clear to your clients that the discount is only available if the invoice is paid within the set timeframe.

How do I offer discounts without my business losing out?

 The success of using a tactic like this comes down to planning.  Your business must have a solid understanding of your profit margins before offering discounts.  Your business must participate actively in cashflow forecasting and business planning to ensure that your prices for goods and services make up for any difference made by discounting.  Also consider that discounts maybe relevant and useful right down the supply chain e.g. consider renegotiating with your own suppliers – ask for discounts for paying early.

If cashflow continues to be a problem for your business

In many cases SME’s struggle daily with cashflow caused by late payments (despite their best efforts).  For businesses who find themselves restricted by late payments or the unfavourable terms inflicted by large clients, invoice finance is a great way to smooth cashflow.

By using Apricity Invoice Finance your business can choose which invoices you would like funded and when.  There are no lock in contracts or ongoing fees, and the facility can be used as little or as much as is required.

Talk to Apricity today about how an invoice finance facility could assist your accounts receivables and get your money moving faster.