You’ve heard the mantra: In business, cash is king. But in order to facilitate that reign, a company needs a stable cash flow, which can be trickier to achieve than anticipated. Late payments and long cash conversion cycles are commonplace and threaten a company’s growth prospects, profitability and viability.
However, many businesses choose not to proactively address the issue of late payments for fear of alienating customers. While the trepidation is understandable, there are strategies to shorten the cash conversion cycle without risking business relationships. Incorporating technology into accounts receivable, constructing invoices effectively, using incentives and late fees, and setting shorter — but still agreeable — payment terms can all help.
In an economic downturn, cash flow is even more critical — and even harder to manage. Companies that are proactive about receivables while working with customers to keep them happy will be better poised to recover in tandem with the economy.