Cash Flow Management: Big Concern for Organizations

Do you feel like maintaining your cash flow is the biggest challenge your organization faces when it comes to profitability and growth? If so, you’re not alone. The Atradius Payment Practices Barometer survey found that a third of survey respondents felt the same way. The report also uncovers some of the issues causing these management concerns. The fact is that almost all of the respondents – 92.6% in the Americas – reported significant numbers of late payments from their domestic B2B customers. Nearly half of these invoices were unpaid at the due date. It’s next to impossible for an organization to leverage its cash flow for growth, let alone meet their financial obligations when there are questions about when invoices will actually be paid. Companies need those funds to maintain their businesses, pay their suppliers, employees, leases and so forth. Moreover, having funds available in today’s rapidly shifting marketplace can mean the difference between jumping at an opportunity or sitting on the sidelines as your competitors meet new customer needs.

What Delays Customer Payments

There are several reasons why customers delay payments past invoice due dates. The first is insufficient availability of funds. In other words, your customers are also having cash flow issues, and they are passing those problems along to you. Another reason customers delay payments is that they are using outstanding invoices as a means of financing. If you don’t offer financing, or they can’t get approved, even a finance charge may not deter companies from improving their cash position to the detriment of yours.Some customers state that payments are delayed because of complexities in a supplier’s payment procedures. If it’s difficult for a customer to pay their bills, they are more likely to push it off until they have no other choice.

How to Address Cash Flow and Payment Concerns

Knowing these are the challenges, it’s possible to be proactive to protect your cash flow. Start by having your team regularly review your receivables. Regular visibility into overdue invoices will let you see patterns with customers as well as formulate a plan for follow-up with unpaid invoices. Follow-ups should happen shortly after an invoice is overdue and on a pre-defined schedule thereafter. Have your team give customers who frequently miss payment deadlines a phone call. Discuss with them strategies on how to get payments back in line with their due dates. Perhaps you can invoice early to better align with new payment policies at your customer’s company. Whatever the reason, remember as you talk with them that your cash position is partially reliant on their paying on time. You should also consider reviewing your payment procedures. Don’t make it hard for your customers to give you money. Streamline your payment processes as much as possible and offer payment options that accommodate your client’s payment preferences as much as possible.

Managing your cash flow is an important piece of running a business. A solid cash flow position will put you in the best position possible to take advantage of opportunities and adjust to meet changing market and customer demands. The challenges associated with managing cash flow are common for mid-sized organizations but can be addressed with proactive measures around payments processes and delinquent invoices. Effective cash flow management is essential for medium-sized organizations to stay financially healthy. Utilizing the best financial projection software can significantly enhance your cash flow forecasting capabilities.‍