Adjusting service or product pricing is one of the easiest techniques for any business to increase cash flow. When is the last time one of your business clients tried to raise their prices?
An accountant understands that cash flow is the lifeblood of a business. Whenever something problem occurs with a company’s cash flow, it can endanger the entire operation. After all, funds are necessary to pay for expenses and overhead.
It’s not unusual that the majority of businesses fail due to cash flow issues, and you don’t want your clients to become yet another statistic. You succeed when your clients succeed. Increasing and managing their cash flow could really help their businesses prosper and expand. How do you begin, though?
Examine Product And Service Pricing
Adjusting product or service pricing is one of the simplest ways for any business to increase cash flow. When was the last time one of your clients increased their prices to reflect inflation, increased demand, or better value? If it’s been a while, it might be time to reevaluate and raise prices.
Clients may be hesitant to raise prices for fear of losing customers. Customers who recognize your client’s worth will stay regardless of the price increase, and these are the best kinds of consumers to have. They value and respect your client’s business, and these are frequently the customers who pay on time or in advance.
Customers who are solely concerned with the price may have already caused problems for your client’s business. Sadly, in many cases, these customers must be pursued for payment or just have unreasonable expectations (quick turnarounds, special offers, etc.) that are challenging to meet.
So, go over your pricing and make any necessary changes. Clients’ cash flow will likely improve if you make sure that they are paid what they are worth.
Examine Customer Contracts
Customer contracts can affect cash flow in the same way that pricing can. A company is less likely to experience cash flow problems the faster it is paid. Clients should review their contracts to determine if this supports their cash flow, and if not, make necessary changes. Are payments expected to be made quickly, or will they have to wait two or three months?
Contracts with lengthy payment terms, such as net 60 or 90, may make it difficult for your clients to cover the time between providing services or goods and receiving payment. Therefore, it may be necessary to modify the payment terms to ensure prompt payment from potential new clients or customers. If necessary, existing contracts may be renegotiated to achieve better terms.
Accounts Payable should be assessed.
How are vendors compensated? It is possible to reduce the overhead labor costs associated with accounts payable by using automated processes.
However, there are many more things that clients can do to maintain a healthy cash flow:
- Check the payment schedule for vendors. Try adjusting payments by even a few days if you are paid early. Clients can also bargain with suppliers to extend payment terms so that they receive their money on schedule.
- Negotiate terms and even prices on a regular basis. Start encouraging your clients to request alternative payment terms because they are unlikely to be provided otherwise.
- Suggest that your clients use an online payment service. Allow clients to pay with a credit card or a bank transfer, and pay vendors using their preferred method. Delaying payments in this manner keeps everyone happy. Clients can easily send and receive invoices with online payment services nowadays.
Check their Accounts Receivables process
If your clients don’t regularly review and optimize their billing procedures, they might be restricting their own cash flow. How should you assist them?
- Billing processes should be standardized.
- Create protocols for sending service bills at the same time.
- Invoices should be sent using the same procedure: email, mail, etc.
Clients who make it as simple as possible to be paid will be paid sooner. Eliminating any obstacles that clients may have with payments should be your aim. Using a variety of payment methods is made simple by software. They might even be able to get paid upfront for their services or goods, depending on the sector of the market they serve or the type of business they operate.
You should also consider how clients handle unpaid invoices.
Unpaid invoices can be handled more efficiently with automation. Clients, for example, can implement automation systems that:
- Remind clients or customers that their bills are due in X days.
- Automatically send late invoice reminders
Reevaluating your clients’ processes and utilizing automation can assist them in capturing payments more quickly. Cash flow will suffer if invoices are not paid in a timely manner. Receiving payments can be made simpler by automating invoices, reminders, and late payment notices without the need for a significant amount of overhead labor.
Evaluation of Costs and Spending
Reassessing your clients’ spending is undoubtedly one of the most straightforward ways to increase cash flow. Your client has the power to reduce expenses, which will immediately improve cash flow.
Take some time to go over expenses and costs. It’s possible that some costs were necessary in the past but are no longer required today. Eliminate or cut costs associated with unnecessary items by going through every single one thoroughly.
If you’re reviewing expenses, think about whether there are more cost-effective alternatives or if the client’s expenses need to be split up differently.
Cash flow is essential to every business and serves as a barometer of the company’s financial health. As an accountant, you can use these suggestions to assist your clients in better managing and improving their cash flow this year. You succeed when your clients succeed.
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