Control Cash Flow

Speed the Flow of Cash into Your Business

People looking at a laptop in a darkened room

Small business owners say monitoring and forecasting cash is their top planned action for 2019.i Yet, owners effectively provide their customers a 39-day, interest-free loan, since the average customer pays 29 days after billing and the average business takes 10 days to generate a bill.1

Cash-focused small business owners looking to accelerate cash inflows to pay bills, build cash reserves or back growth plans should rethink the collections process and free the funds they currently “lend” to customers.

#1 Break down barriers to buying and speed the receipt of funds

Every customer’s buying journey ends in making a payment. No matter how compelling your offering may be or how quickly the customer decides to “buy”, completing a sale depends on customer payment. Forty-three percent of payments to small businesses still come by check, 1 a fraud-prone and cash flow-slowing form of payment.

Improve cash flow with alternative payment methods
Understand Customer Payments

Small business owners rank offering alternative payment options one of the top priorities for cash management in 2019. High growth companies1 are even more likely to implement alternative payment methods to boost sales by making buying easier and speed the receipt of funds. Payments methods, like credit and debit cards or money transfer services, offer payment convenience, reduce collection time from weeks to days, streamline posting and account reconciliation, and release funds tied up in accounts receivable.

#2 Invoice and bill promptly

How fast do you convert sales to receivables? Receive funds faster by invoicing at the time of, or immediately after delivery. Less than half of businesses require payment upon receipt of goods or services. Businesses that don’t collect payment upon receipt wait an average of 10 days before invoicing the customer. 1 With the average small business customer taking 29 days to pay, 1 getting the first invoice in the hands of the customer earlier could speed payment. Consider online billing and invoicing to shorten the payment cycle, reduce postage and paper handling, and simplify posting and reconciliation.

Accounts Receivable Policies

#3 Tighten terms and follow up on outstanding receivables

Generous terms for customer payments can leave a business strapped for cash. One-third of all business owners still offer 30-day terms (essentially a 30-day loan to your customers), missing the opportunity to get cash in faster. In a world that has shifted from paper to electronic transactions, 30-day terms built around paper invoicing and check mailings are ripe for reduction. When coupled with the acceptance of card payments, businesses have an opportunity to move cash in more quickly and free funds tied up in accounts receivable.

What can you do to Lower Days of Accounts Receivable

Collections provide additional opportunities to reduce receivables. Only 9 percent of businesses say they have automated collections. High-growth businesses are 20 percent more likely to say they want to automate collections in the future. Collections best practices start with clear communication of payment due dates at time of sale, and use email, text, mail and phone follow-up. Businesses can adjust messaging based on customer payment history and credit strength to target collections energy and get cash in more efficiently. 

Rethink receivables to get cash in the door.

Meet with a SunTrust Banker to find ways that SunTrust can help speed the flow of cash into your business.

1 SunTrust conducted research with 515 small business owners ranging from $100,000 to $4,900,000 in annual revenue in the first quarter of 2019. The high-growth segment was derived from the fastest growing thirty-three percent of those companies.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.