Does your business need cash? Properly managed A/R (Accounts Receivable) and Collections can give your company the working capital that you need.

I don’t have to tell you that the current economy makes it difficult for your business to find the cash it needs – you’re living it! A sluggish cash flow cycle forces small business owners look to relatives, savings, and retirement plans – with little to show for it. Banks are not talking to you, and your credit cards are high interest risks. Money is sitting in your A/R (Accounts Receivable), and you need a good plan to speed up your Collections.

Learning how to find cash in your own operation is a MUST in lean times. Look at this “cash flow cycle,” visualizing this cycle for your business, and noticing how each segment can change in size:

Your cash cycle is the total number of days that it takes you to create, sell, and collect. The count indicates how many days your cash is tied up, so this reveals your business liquidity – and current and potential lenders really want to know what about your business liquidity.

Each of these cycle segments is worth its own discussion, but let’s focus on one aspect of one way to accelerate the flow of “cash in.” With some growth, you may consider outsourcing collection of receivables to a fulfillment service, but first, let’s look at what you can do in-house.

Present flawless invoices. Design an invoice form and proof them before invoices go out. Be sure they clearly include the following:

  • The business name and correct address for payment
  • A specific invoice number that allows payers to match invoice with order
  • The customer’s purchase order number – where applicable – with brief description of order or service
  • The payment due date and terms and conditions of payment that, might, for example, include early discount or late penalty

Our goal is to maximize the efficiency of payment. Eliminate the back and forth, the calls and the faxes correcting invoices. Get it right the first time, and you will cut down the payment cycle


by Steven Schlagel