There are many business challenges, but the most important is managing cash flow. Cash flow is the lifeblood of a company. Businesses underestimate the importance of cash flow, thinking that if they can earn revenue their business will grow and survive. Without adequate cash flow, their small businesses could stagnate or fail if they have to make regular outgoings like rent, wages, stock, and utilities.
This is particularly important for Asian businesses, which according to a PwC global survey, are the second-worst performing regions in terms of network capital. When compared to the rest of the world, Asia’s businesses are second in terms of converting working capital into cash. This indicates that money held up can negatively impact day-to-day operations as well as growth. This is an average of all companies across Asia, but it shows that Asia has a huge opportunity to increase and create more business value through liquidity.
Visa is one company that has led the development of payment methods and solutions together with its partners. This will help businesses be more competitive in the digital age. The new solutions include time-saving apps, leveraging credits, and simplifying payments.
Here are seven ways to look at it:
1. Keep current cash flow forecasts
Based on previous sales, make and keep a forecast of your likely sales and expenditures. You can predict your expected expenditures such as rent, wages, and equipment, and compare them to your expected incoming cash. This will help you identify when additional capital is needed. These forecasts can be automatically prepared using online accounting tools like Xero or QuickBooks. This allows you to monitor and manage cash flow in real-time.
2. Streamline Invoicing
Invoice creation and delivery delays can have a negative effect on Days of Sales Outstanding (DSO). This means that it will take longer for you to collect your receivables. This problem is magnified if you still rely upon hardcopy invoices, which can take several days to arrive and delay payment receipt. Your business is missing the chance to leverage revenue and potentially reinvest it, which could generate more value. Invoice2go is an invoicing app that solves these problems. It creates and sends invoices by email to your customers with just a few clicks. The e-invoices include a payment button so that customers can pay with their card by simply clicking a link.
3. Define your payment terms
Make sure you communicate your payment terms when you send an invoice. If a customer fails to pay by the due date, a follow-up process should be in place. Invoice2go, for example, will notify you when customers open your invoice email. It also lets you know when payment is due.
4. Stop accepting cheques
Cheques are less popular as countries and companies realize that they are inefficient and costly. Singapore has launched a government initiative to eliminate cheques by 2025. Some companies still use cheques out-of-habit and do not know about a digital alternative. Your business can accept bank transfers or card payments faster than cheques, which will improve your cash flow and enhance your brand image. Customers can be incentivized to switch payment methods by offering discounts, such as “Receive a 3% discount on this invoice if paid within seven days.”
5. Modernize your point-of-sale
Customers are becoming more comfortable with electronic payments due to the increase in card and mobile payments. Businesses that cannot accept new payment methods will be more affected. This problem can be solved by purchasing a payment terminal. It will allow you to accept payments via contactless, credit and debit cards, as well as devices with near field communication (NFC) quickly. This will allow your customers to pay you quicker, without relying on cash. It also saves you time because payments are electronically settled with your bank.
6. Accept payments from all countries
Customers in many Asian countries prefer to view the products before they pay when ordering online. This customer need is often met by cash on delivery. This option is great for attracting new customers to your company, but there are hidden costs associated with cash. The high non-delivery rates can be due to a lack of cash or change. Cash can also be lost or stolen. Manual reconciliation and settlement can take time. A mobile POS solution that accepts mobile payments and cards will be able to handle 100 times of these challenges and will make it easier for cash flow to improve.
7. Get interest-free credit with leverage
Payments using credit cards may be an option in certain cases and for some suppliers for support. Your financial institution is the one that will advise you on whether or not this option is viable. They may offer up to 55 days of interest-free credit which can positively impact your cash flow. To avoid interest and late repayment fees, it is important to plan your repayments carefully. Talk to suppliers to find out if they are willing to give a discount for early payment. This will help reduce your outgoings as well as benefit your business.
