Managing accounts payable and accounts receivable can be a constant struggle for business owners. How much cash do you need at once? Do you risk turning away business for a stricter payment guideline? Or risk the chance of low liquid cash needed to pay bills?
Fortunately, Citizens Bank is here to the rescue with a multitude of tips and advice for the small to medium business owner to successfully manage the accounts payable and accounts receivable for optimum cash flow.
First, it’s recommended to consistently compare prices and review terms from multiple suppliers before choosing one. You should regularly re-evaluate and try to negotiate terms for suppliers and service companies like your insurance, utilities etc.
Second, you should offer your customers the ability to pay on retainer to keep a consistent incoming cash flow. Additionally, make sure your prices are competitive. Ask yourself “Am I charging too much or not enough? What can I do to get more for the services we offer?”
If suppliers have an early pay discount, do it! Even though you spend more cash upfront, paying less for supplies will make a big difference in the long term financials. If there aren’t any early pay discounts, then hold on to your cash until the appropriate payment dates. You can also ask vendors if they will extend payment due dates to align with incoming cash flow.
You should also prioritize your payees. Pay the most important people first (employees) and vendors with strict terms that can jeopardize your business.
There’s a lot more information! Read on in the infographic below.