The pandemic reconstructed our lifestyle. In the current situation, the businesses faced a lot of interruption in the cash flow. This means that you cannot pay the vendors, suppliers, and employees. Clearly, unpaid invoices can shake the existence of the business. And, as a business owner, you want to meet the invoice payment deadlines, as it can keep the cash flowing in and out smoothly. But, as already mentioned, businesses are facing problems with their dues. So, what to do? Keep reading to learn more.
Can you handle such situations?
Did you know that in ordinary situations around 80% of the business accounts pay the invoices late? Especially, during these times when economic pressure is high and downturns are imminent. A number of businesses are facing a lot of issues in paying on time. However, you can handle these circumstances by giving them immediate attention and adopting the right measures. To pay timely, here in this blog post we have mentioned some methods that will help you to pay the invoices faster.
Handle the lines of credit
Managing your lines of credit is the smooth way to get out of the rough spots. You can open a LOC and limit its use. They are best for short term fundings for making quick payments. At the same time, you can adjust the monthly payments according to the cash flow. For example, if your finances are receivables, you can get a merchant cash advance (MCA). Your MCA lender would keep your receivable invoices as collateral to lend out the money. Or, you can explore https://bentoforbusiness.com/features/virtual-debit-cards/ for your quick debt needs. In short, as a business owner, you need to maintain your receivables and your payments to the best of your ability.
Give discounts to the customers
You can offer discounts to the customers who are making the payments on time. A number of businesses offer incentives and get fast payments in return. But, before you do that, be very vigilant about the offer you are offering. You can use digital methods to pay your vendors or you can reach them out on their email addresses. This way your customers get the opportunity to choose the payment method. Do not give too much discount, as it can threaten and have an impact on your organization.
Lengthen the deadlines
People are facing a cash crunch and it is necessary to consider this situation and take measures directly. Extending the deadline is one of them. You can add an extra fee, but we suggest you lengthen the deadline as it guarantees the meeting of the payments. Most importantly, it will build healthy relationships with your customers.
Go through your customer’s credit score
If your customer is having a bad credit score, there are fewer chances of getting the payments. Therefore, to avoid such situations it is essential for you to know about the credit scores and make smaller invoices. This will enable you to have invoices with shorter terms and you will be more comfortable with the payments coming on time.
Know your cash conversion cycle
When you know about your organization, you need to know about the CCC i.e cash conversion cycle. To calculate it, you need to determine the section of time, if it is monthly, yearly, or quarterly and
- From start to the end, note the inventory
- Identify the receivables and payables from beginning to the end
- Recognize the revenue
If invoice payments are not made timely, it can have a negative impact and can threaten the existence of your business. But, if you follow the right methods you can maintain the cash flow and prepare yourself for this current situation. At the same time, you can also apply for government loans including PPP and invoice financing to begin the payment cycle.
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