Cash is king: When and how you get paid is critical to your business

Read Time: 4 Min
Huntington has in-depth knowledge of the cash flow cycle and practices to help optimize cash on hand. In the face of an uncertain economic climate, now is the time to connect with us.

For many small businesses, cash flow is the life blood of the company. It’s the money needed to purchase inventory, pay employees, and keep the company strong. Owners understand that managing cash flow is important to the financial health of their businesses.

In fact, it’s a major concern. A recent study, conducted by Intuit, showed 69% of surveyed small business owners lose sleep at night due to concerns about cash flow. It’s easy to see why. The same study from Intuit shows the average surveyed small business has $53,399 in outstanding receivables.

What many business owners might not realize is taking the time to evaluate when and how you get paid can reveal ways to improve your cash flow.

Late payments are a self-inflicted wound

Late payments cost surveyed U.S. small and mid-sized businesses $741 billion annually. Unfortunately, a lot of this financial pain is self-inflicted, as owners tend to let payments slide in hopes of maintaining their customer relationships.

However, routinely accepting late payments can put a real dent in your cash on hand and can limit your ability to pay your own vendors on time. What’s more, lagging payments may force you to dip into your line of credit in order to pay loans, purchase supplies, or even meet payroll.

Here are a few tips:

  • Review your company's payment terms and make few exceptions with clients.
  • Submit a reminder invoice 5 days before payment is due.
  • Follow up immediately on late payments, preferably with a phone call.
  • Align your collections process with your terms to help avoid late payments.

Manual processes impede cash flow

How you process payments can also make a big difference in managing your cash flow. Processing checks is time consuming and labor intensive. It requires staff to manually receive payments in the mail, post them, and take them to the bank for deposit.

This introduces both inefficiency and risk. It also means a delay in those receivables hitting your account.

Here are a few tips:

  • Offer several payment options to your customers, including ACH, lockbox, and credit card.
  • Encourage electronic payments and utilizing banking solutions to help reduce the time and money invested into the process by your staff.

Huntington has in-depth knowledge of the cash flow cycle and practices to help optimize cash on hand. In the face of an uncertain economic climate, now is the time to connect with us. We’ve helped many business owners improve their cash flow management with a thorough cash flow analysis and by offering customized solutions that helped them better manage both payables and receivables.

Ernst, Danielle. State of Small Business Cash Flow Survey Fact Sheet. Intuit QuickBooks. February 6, 2019.

The Domino Effect: the impact of late payments. Sage Group and Plum Consulting. December 2017.

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