Improving cash flow should be a year-round process for your organization. Looking at the backbone of your business should not happen once a year. It should always be a top priority when running a business of any size.
That being said, when we get towards the end of the year, it does provide a business with an opportunity to take a deeper look at the health of the business and ways to improve cash flow before the start of a new year. If your business does have any challenges with cash flow, you’ll want to correct those before you start off the new year.
You don’t want to start next year off in a negative cash flow position.
Sit down with advisors to understand your cash flow
If you are operating a small business, then you understand you could be running around at all hours of the day handling various responsibilities. We get it and for many of us, it comes with the territory. But there are times when you must hit the pause button to look at critical parts of your business. And one of them is the health of your cash flow.
Schedule time with your team and especially the person who is overseeing your books such as your bookkeeper. You’ll also want to take time to get a deeper snapshot of your business by meeting with your CPA. Ask them to identify areas that are cause for concern such as late payment trends or payments that are out over 90 days. Other factors that they should be looking at are an increase in expenses and other costs that continue to trend upward. You want to get a handle on these before they get out of control.
Review your pricing before the end of the year
Take the time before you start another year of business and conduct a thorough review of your pricing strategy. We’ve seen prices for goods and supplies soar in 2021 and it has caused many businesses challenges in pricing as well as commitments to customers. Many of these costs have been absorbed by businesses like yours and it has caused a hit in their cash flow. The end of the year is a great time to not only review your pricing but how you handle cost increases to stay profitable.
Identify the trends in your accounts receivables before the end of year
You want to take a look at the age of your receivables. Every business regardless of size is going to have a percentage of customers that are late in paying or not paying at all. It’s up to you, working with your bookkeeper to determine if this trend is growing and if you have accumulated more customers that continue to pay late during the year. Hopefully, your business has grown, and you have secured more customers. But are they paying you on time?
Conduct a review of how you accept payments from customers
The end of the year is a great time to review all the methods that you can receive payments from customers. You will better your chances of prompt payments if you increase the opportunities for payment options. While we know everybody excepts a paper check, making sure you offer other payment options is critical today. For example, if you are a lawn care company or a pest control management business, do you offer ways for customers to pay by credit card on-site? Do you have a payment option on your website? Looking at all these options before the end of the year is a great way to increase cash flow now and in the future.
Don’t be afraid to hire a collection agency
Many collection agencies are now working together to change the image that many may have of debt collectors. That’s not just consumers who have that perception, it’s businesses as well. Many companies have hesitated to hire someone externally to handle their collections because they do not want to risk losing their customers. But that image has changed and the way that many agencies operate has fundamentally changed over the years as well.
We know that by treating people with respect and by having tactful and productive conversations with consumers, collectors can achieve more results for businesses like yours. Collectors now try hard to earn the trust of consumers and your hard-earned customers. These professionals treat your customers like their own and they seek to understand their personal situation and why they have not paid you. And more importantly, they create solutions together with your customer.
The end of the year is a great time for you to find the right collection agency if you don’t already use one. Finding an agency that has a philosophy like we just mentioned can be a game-changer for your cash flow. You don’t want to go another year struggling with this vital component of your business so it’s time for you to find an agency that can treat your customers with dignity and get the job done.
And at the same time, have a goal of retaining those customers for you. When you interview a collection agency, ask them specifically how they will treat your customers.
Are you ready to get next year off on the right track and improve your cash flow? Book a free consultation today.