One of the best ways to improve cash flows is to get your receivables coming in sooner.
And there’s one way that can improve your days receivable as a sure thing.

A sure thing is taking any delays out of your billing practices.

If your billing’s delayed, your collections are almost automatically going to be delayed too. In many cases, companies will pay invoices from the day they receive them. Take an extra three or four days to get your bills out and you just added three to four days on the backend.

You might be depending upon information coming in from the field to get your billing done. You might rely on various invoices from suppliers to get in, so you can complete your project cost and complete that part of the billing. Whatever it is, first step is to take a look at see what is causing the delay in the billing.

Then find ways that you can cut it out. If you have people in the field, perhaps, they can get the information expedited to you. Could it be faxed? Could it be scanned in email or could it be FedEx in if the amount is significant enough?

If it’s supplier delays that are causing it, look for patterns. You might find that it’s typically a couple suppliers that are having the delays. Let them know how important it is for them to get their invoices in to you. That’s a win-win for both of you. They get it in sooner, they get paid sooner. Same options apply to them, can they send it electronically? Can they fax it? Can they overnight it?

Perhaps, you have projects billing and some delay might be for the final billing on the particular project. What can be done ahead of time? Could you, in essence, do a dress rehearsal on the project billing and see what it looks like with 98% of the cost in, so that then all you’re doing is just waiting for the last couple items to quickly complete it and get it on its way?

Perhaps, there might be some procedural things within your company, besides things that we have mentioned above that could be slowing it down. What’s that costing you in real terms in cash flow? Is the delay really worth it? Probably not, but what can you do to cut that out and make that part of your business more efficient?

So when you’re looking to improve your cash flow and looking to reduce the investment in accounts receivable with the reduction inn the days outstanding in accounts receivable, start first for the low hanging fruit. See where you can streamline your billing practices and get a jump on it right out of the gate.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value