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Spring is a good time to improve and enhance financial tracking and management. With a good portion of the year still ahead, you can “clean up” priority areas of your organization’s financial management and make this your best year ever. Even one or two small changes can help.
Review this list of important financial management refinements to find ways to make a positive change in your organization.
With a strong, sustained sense of cash flow, you can plan for shortages, understand when surpluses might occur, and protect your customer and vendor relationships. Sixty percent of businesses regularly experience cash flow problems, and seven out of 10 have had cash flow struggles that kept business owners up at night. Committing to habitually reviewing current cash flow and what’s in store in the months to come is an important step toward improving your ongoing cash flow position.
“Some businesses feel too crunched for time to routinely analyze their cash flow,” explains Melissa Bello, Vice President at Citizens Bank. “But when you understand your cash position, you can avoid dry spells and make good use of surpluses.”
If you struggle to make time to review your books, have someone on your team or your bookkeeper or accountant regularly prepare a report for you. You might consider setting up a meeting with them to review your books if you think this will help you consistently study them.
A long lag between making a sale and receiving payment can cause all kinds of financial trouble for your balance sheet. Forty percent of business owners report that a lengthy period between sales and payment can reduce their ability to seize opportunities and meet payroll.
While the fix for this might seem to be with invoicing and collections, it actually starts much earlier. Solidifying information when sales are made reduces misunderstandings and mistakes that slow down the pace of money flowing into your company. During your spring cleaning, enhance the contribution that your sales team makes to bringing in cash quickly by ensuring they capture or update contacts for approval, processing, and payment as well as how customers prefer to be invoiced.
Also, immediately starting the process for creating a purchase order, work order, or other steps to fulfill the order once a sale is made will help hasten the delivery of cash to your company. Automatically route orders to your back office or third-party fulfillment service, if you use one, or establish a time mandate for initiating work.
Slow receivables are an issue for many organizations — one-third of U.S. small businesses estimate they have $20,000 in outstanding receivables. Spring clean your billing and collections habits by checking that you’re taking all possible steps to invoice quickly and to promptly collect what’s owed. Your “clean up” can include invoicing at time of service or immediately when an order has shipped.
To follow up on bills sent, set up alerts for payment due dates and customer reminders for late payments. Some banking tools can streamline your collections process. Use automated clearing house (ACH) or wire transfer collections wherever possible to shorten the length of time it takes to access cash. If you receive many mailed checks, try a lockbox network: Instead of sending checks to you, customers mail their payments to a designated P.O. box so the bank can receive and process them more quickly.
Improve the payment side of your organization as part of your spring cleaning to reduce the number of incorrect payments, duplicates, or payment tracking mistakes. Affect a permanent fix by determining why the problem occurred. Consider streamlining your supplier base too. Focusing on your best vendors — the ones who do great work on time for a fair price — will streamline your business financial management. Fewer vendors means fewer payments.
Electronic bill pay services make it easier to schedule and track outgoing payments. Rather than writing a check for rent and utilities each month, for example, you can set up automatic recurring payments. Using online bill pay can also give you better control over your cash flow if you precisely schedule payments to go out right when they are due. Business credit can also help with financial management cleanup. Bills paid by credit card have an automatic record which helps with tracking, and the “float” between when an expense is incurred and payment is due can help with cash management.
Fraud against deposit accounts is a constant threat, with check fraud making up nearly half the losses, according to the latest American Bankers Association Deposit Account Fraud Survey.
“Until it happens to you, you may tend to gamble by not putting the right anti-fraud safeguards in place,” Bello says. Get ahead of potential security breaches by acting now: Review the fraud protection you already have in place, and ask your banker about options for bolstering your defenses. Bello explains that programs like Citizens Positive Pay verify check details before allowing transactions. Another safeguard is Dual Signature Review, a manual inspection by your bank of all checks exceeding the dollar amount threshold set by you for any sign of missing or fraudulent signatures.
Part of spring cleaning is improving operations and clearing out so you can make plans. Once you’ve tidied up, set goals to invest in your organization. Consider rewarding the employees who make you successful or adding technology or equipment that can support your goals.
Citizens Bank’s cash management solutions can keep your day-to-day operations running smoothly with collection services, disbursement services, and more.
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