Save Your Business in Hong Kong by Relying on Your Receivables
Managing cash flow is important for any business and based on studies, 82% of businesses experience turmoil because of cash flow management problems. The importance of cash flow comes into play when you pay off staff, acquiring inventory needs, to serving customers. There are a lot of ways to address cash flow problems, from having loans to better credit terms negotiation with the suppliers and lenders your company needs. Cash flow problems can be avoided if you have a clear strategy. An effective way to establish a cash flow you can sustain is managing accounts receivables of your business. This could definitely save your business in Hong Kong as long as you do certain tips.
Your Accounts Receivable Team Can Work Wonders
The Accounts Receivable team is an accounting department that upholds the practices and policies of sales management based on set credit. For example, a electronics company could offer a line of credit or financing on products with higher prices like televisions or sound systems. This team that establishes credit and bills to the customer each month is the accounts receivable team.
They can oversee the credit process from beginning to end and create new terms and conditions. For a law firm that is offering sales on credit, it is integral to have a hardworking and knowledgeable accounts receivable team. Moreover, putting one into action before using credit saves the firm money and from a headache too.
Managing Receivables Well
It is always a good idea to track accounts receivable because otherwise, you might see that your available cash is lower than what you were expecting. If you need to make a big payment in the future, you can be assured that there will be money coming in to pay that off.
Until these payments are received, they are not part of the cash flow of your business. Therefore, it is important to go after your accounts receivable to make sure there is money coming in. Otherwise, you might end up finding yourself entirely lower than the benchmark of the cash you need.
Evaluate the Credit Terms You Give
When your customer receives the invoice your business gives, think about the payment terms you are giving them. The options could be from due when the payment is received in a specific number of days, could be anywhere from net 15 until net 120. The generous terms of credit could improve the cash flow position of your customer and a might become persuasive to be in business with you.
Although, being very generous with the credit terms could hurt the cash flow of your company. It is essential to strike a balance between meeting the needs of customers and making an effective business plan. Before credit terms are established for the customers, project the cash flow needs of your company. That can serve as a metric for the policies you set. So, always evaluate the credit terms to save your business in Hong Kong.
Outstanding Accounts Receivable Can Slow Down Cash Flow of Business and Growth
Another thing to save your business in Hong Kong is to watch out for your cash flow. Not doing so prevents your company from growing with demands, trends, technological updates, and others.
For instance, a modern software which makes the job more efficient and easier can boost production and lower the cost needed to make goods. Without sufficient cash on hand, you cannot pay to have your computers upgraded and have a better workflow. With tighter policies on the accounts receivable available to you, this money might be available to keep things flowing smoothly.
Another tool you need to know about is the invoice factoring. This tool allows you to sell any unpaid invoice to a lender and buy the software update you need. It’s actually possible for lenders to immediately give a part of the invoice which can boost your cash flow. When the factor has been paid by the customer, you are going to get the balance remaining with interest and fees deducted from it already.
This is another thing to note if you want to save your business in Hong Kong. How quickly are you going to give the invoice to clients after their product or service has been delivered? Invoicing promptly is a component that is important in managing the accounts receivable of your business. On this level, you should promptly send your invoice because it reinforces your company’s image as being professional and direct. It will subtly convey to the accounts that you take every payment seriously. When the customer is experiencing financial difficulty, accountants undergo difficult decisions about who needs to pay 1st. They have less tendency to delay paying a company that is serious about the accounts receivable.
Getting the invoice in the system is also an indication that payments might need several steps for approval on the part of the customer. Lastly, payments usually go in batches, whether it’s weekly, biweekly, and monthly. The sooner you submit the invoice, the sooner you can expect the customer to pay within the approval cycle.
How Do You Start This?
Someone should walk you through the cash flow statement of your company and this is ideally your business accountant or someone who has background on the matter. Hiring a professional accounting service provider is beneficial to your company and especially its future. Ask them if your invoice is going is good and efficient that you can rely on for your business.
You could save your business in Hong Kong by properly monitoring your accounts receivable and remembering the tips above. You should remember that every payment is important to your company to prevent it from failing or going downhill.