As a small business owner you have to be creative, that mindset also applies to small business accounting. Sometimes, the old way of doing business needs a refresher. Let TSAT guide your small business with these tips and with your overall accounting and finance needs!
Today, we’ll look at some emerging trends in Accounts Receivable (A/R) and Cash Flow, basically creative ways to get the money that is owed to your business!
The first and most important role of accounts receivables in small business financial reporting is to determine whether your customers are paying on time. If your customers are consistently late on their payments, you will need to follow up with them.
When your business has an outstanding invoice, it is recorded in your Accounts Receivable Ledger. This enables you to see the total amount owed by your customers. If you are only owed $10,000, you will be in the red. To ensure your cash flow remains healthy, check your accounts payable regularly and pay off your outstanding invoices. This will keep your cash flow positive and avoid the situation of running out of cash.
To maintain a healthy cash flow, you need to track your total accounts receivables. This includes the amount of money owed by your customers. If your customers are paying quickly, this means that you don’t have a large amount of money owed to you. On the other hand, if you are growing rapidly, your accounts receivables will grow. Regardless of how much you charge for your products and services, you need to know how much you are earning each month.
- Leverage The Flexibility Of ‘Cash Apps’ – “We recently added the PayPal feature “Pay in 4” to our website purchases“. This allows the end user to either pay in full at checkout or pay in four installments through their agreement with the payment vehicle. By accepting various “cash apps,” we provide our end users with the ability to own the decision of how to fund their purchases without having to change our business model.
- Focus On Cash Flow Generation – Some of the best companies have found ways to turn the negative cash flow cycle of accounts receivable into a positive cash flow. Offer your customers discounts with a deposit or even require a deposit. Sell at a lower price than your competition, and focus on cash flow generation.
- Contactless Transactions– Contactless transactions had already been widely adopted before the pandemic, and safety concerns accelerated their growth. Moving forward, I would expect to see more businesses expand their contactless transaction capabilities—and enable customers to use preferred payment methods—by accepting digital and mobile payments.
- Standardize Unpaid Invoice Notices – To get a better handle on accounts receivable collections, business owners need to automate the process as much as possible. The technology is already here, and since the trend is automatization, clients don’t mind the constant reminders that they have an unpaid invoice, even if it’s not due yet. Make sure your AR system sends constant notices so your clients are always aware of unpaid invoices.
- Add Convenience For Customers – How easy are you making it for your customers to pay you? Automation of the collection process for accounts receivable is a highly effective way of increasing positive cash flow. If you answer “no” to either of the following questions, you may need to modernize your accounts receivable: Can your customers pay their bill directly through the invoice you send them? Can they pay via credit card and/or ACH?
- Incentivize Programs For Accounting Teams – incentivizing the accounting team (TSAT will definitely take your incentive 😊) to become creative in AR collections. Many business owners allow these accounts to drag, making them harder to collect. Likewise, small-business owners are often very poor performers when it comes to AR. Therefore, creating incentive programs such as bonus programs can help mitigate AR issues.
The Cash Flow that stems from Accounts Receivables is the lifeblood of a small business. A strong account receivables policy will ensure your company stays on top of its finances and maximize your profits. It is crucial to understand your account receivables turnover ratios and how your company can improve it.
At TSAT, we know that a great businesses need to operate at high levels of service, accuracy, reliability, and throughput. We also know that the only way to ensure these things are achieved is to develop a comprehensive set of accounting and finance policies and procedures and to regularly train all personnel involved in the management and control of the company’s software. Only by taking steps toward accounting, quality assurance, and finances can a small business accounting department expand its business and improve its profit margins. It takes a little work to make sure that every aspect of small business accounting is running at full capacity, and we are here to help!
Here at TSAT, we are not simply tax preparers. We work with you to provide a 360-degree strategic financial advice, including small business operations and investment guidance. We will help you stay ahead of the curve when it small business or personal investments!
If you are a gig worker or small business owner looking to grow your business, TSAT’s AMAZING team considers much more than just your taxes!
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