Most entrepreneurs realize the importance of managing their organization’s cash flow properly. It can virtually make or break their businesses in the market. Without enough money carrying out their commercial operations is a tall order. The last thing they want to go through is a cash crunch situation. In the worst-case, they may have to apply for bankruptcy. This can leave an indelible mark on their creditworthiness. It also ruins their reputation in the eyes of the public. On the other hand, these businessmen shouldn’t make the mistake of keeping too much of it. It simply means they are not utilizing their funds properly to generate income for their establishments.
Arnon Dror Center How can entrepreneurs improve their cash flow position?
Arnon Dror is currently the Senior Executive of operations for Janus Technologies. This is a prominent American company offering innovative security solutions to businesses of various sizes. He is well-known in the world of business and finance. He has more 20 years of experience under his belt specializing in diverse fields. This includes business modeling, corporate mergers, supply chain optimization, cash flow management, ERP Integrations, and international taxation. The Arnon Dror Center team of professionals play a crucial role when it comes to helping their clients understand the ways cash flow works.
Arnon Dror explains when it comes to managing cash flow most entrepreneurs overlook one important aspect. They don’t pay enough attention to account receivable especially cash collections. Recent research shows many of these businessmen have numerous slow-paying customers. Many of these individuals and businesses don’t settle their outstanding invoices immediately. They take 90 days after the expiry of the original dues dates of such documents to pay. During the interim period, the proprietors go through immense difficulties to cover their operating costs. This hampers their market operations and is a stumbling block in the growth of their organization. He suggests these business owners adopt the following three important measures to improve their account receivables:
- Digitalize their invoicing system
Many of the customers of such entrepreneurs complain that they don’t receive their invoices on time. This is the reason why it takes them so long to settle their dues. Such a situation can arise from various causes.
In many cases, they are beyond the control of both the parties. Under such circumstances, the proprietors should opt to digitalize their invoicing system. In doing so, they should retain all the relevant information. These include the description of the merchandise, the price per unit, total sales value and payment terms.
- Open to multiple payment options
Entrepreneurs need to have an open mind to using multiple payment options rather than only traditional modes. They introduce plastic money, PayPal, electronic fund transfer or internet banking. This makes it easier for their customers to clear all their dues on time. Moreover, they can do so without any hassle. The only concern these proprietors may have is such systems should be safe and secure. To clear their doubts in this regard, they should consult an expert specializing in such matters.
- Minimize their invoice’s terms of payments
Proprietors should take a good look at the terms of payment they offer their clients. They could consider reducing the period from 90 days to only 30. This helps to reduce the pressure on their cash flow situation. These businessmen should make such terms and conditions very clear in invoices they issue. To encourage prompt payments, they can provide incentives to their clients in the form of cash discounts. Similarly, they should penalize defaulters.
The Arnon Dror Israel team of skilled professionals say entrepreneurs need to understand improving their accounts receivable position is vital to the success of their businesses. It acts as a catalyst in improving their cashflow position. This is a fact they cannot overlook. The above three important steps can help them achieve this important objective.