Cash flow management involves planning, tracking, and controlling the flow of cash in and out of a business. It is a necessary process in financial planning to ensure that sufficient funds exist to meet business needs. Effective cash management is a critical component of a company’s financial stability.
Top Cash Flow Management Challenge: Late Payments
Through its annual Financial Management Priorities survey, APQC found that late payments from customers are one of the most common cash flow management challenges facing organizations in 2024. This finding makes sense—delayed customer payments can contribute to a liquidity crunch that prevents an organization from taking advantage of key business opportunities or simply keeping the lights on.
When customers fail to pay on time, following up with a robust collections effort is an important next step—but it’s important not to alienate your most strategic customers today and lose their business in the future.
Here are three helpful tips to get paid faster:
1. Stay connected to customers and keep the invoice on their radar
Ensure you have the correct billing contact for your customers and that they understand the payment due dates are two of the best ways to ensure your invoice gets paid as quickly as possible. To keep the invoice on their radar, provide customers with at least an annual opportunity to update their contact information and send system-generated reminders that their due date is approaching (or already passed).
2. Make it easier for customers to pay through electronic payment
Providing easy payment options for customers—and making those options visible—can also help to drive down your cycle time. While some companies in 2024 are still paying their invoices with a paper check, many customers would be willing and even prefer to pay electronically. Review one of your most recent invoices to ensure these options are visible and easy to access—not buried at the back of the invoice in tiny print.
3. Follow up with customers who are late in paying before referring late payments to collections
Developing the capability to follow up proactively with late-paying customers helps you to get paid faster. In many cases, your customer may also appreciate knowing you’re still waiting. Especially in a business-to-business context, your customers may think they have already paid when, in fact (whether due to fraud or problems with AP), that payment has fallen through the cracks. Reaching out also allows you to work with your customers if they are having difficulty paying. While the profitability of your own company is your highest priority, you may want to offer flexibility if one of your best customers is struggling. In the long run, keeping that customer may be better for your bottom line than aggressively collecting payment at the expense of your business relationship.
Learn more in APQC’s article, Getting Customer Payments More Quickly.
Are you more of a visual learner? View the corresponding infographic, Strategies to Avoid a Cash Flow Crunch.
Explore additional APQC resources on cash flow management: