No business ever wants to lose money.
Boosting revenue and generating profit is crucial to the survival and success of a business. To achieve this, businesses need to get paid for every work done.
Unfortunately, many small businesses continue to bleed money. There are several reasons why small businesses lose money such as bad accounting, combined bank accounts, poorly priced products, non-existent investing, and lack of online presence. Among these, bad accounting is probably the most prevalent cause of financial losses.
A chaotic accounting process can lead to poor billing and collection. The problem with unbilled work and unpaid invoices is that it can go slowly and silently. When you have a steady stream of revenue, unpaid invoices can be hard to see. You’d only be aware of it once financial losses have ballooned. If not addressed early, these pesky issues can adversely impact your cash flow and eventually your operations.
It is important to stop the bleeding quickly to avert serious problems. How do you stop losing payments?
Identify the cause
You need to know quickly why and how your business is losing money. The sooner you identify how money is lost, the faster you can strategize and stop the leak.
Review your accounting processes to see which steps need to be addressed. Investigate how your staff implements the procedure. Is your staff doing it properly? Are lost payments due to genuine mistakes, or they intentional? Do you need to upgrade your invoicing process?
Study the trends in your cash flow to see any distinguishable patterns and/or variances. Unscrupulous employees might be taking advantage of your fragmented processes. For instance, if payment losses occur only at a certain branch or specific days, you can assume malicious intent and it requires closer scrutiny.
Improve your processes
As a business owner, you want to get paid as soon as work is done. A disorganized accounting process can lead to delayed billing and payment. In fact, it’s easy to overlook unbilled work especially if you have numerous transactions.
While it is impossible to fully eradicate cash loss, streamlining and automating the accounting processes can reduce losses. Take time to organize and improve your accounting cycle. Some strategies that you can implement include: use of a document template for paperwork and investing in IT solutions for managing and tracking invoices.
Automation can make billing and collections faster. Remember that employees are human after all, and they are bound to make mistakes. By implementing cash management technology, you can minimize manual intervention in the accounting process, thus reducing the risk of errors.
You also need to establish policies that will ensure customers pay you. This includes a thorough background check of customers, having a signed contract, requesting payment upfront (if possible), keeping detailed records, implementing penalties for delays and delinquencies, and efficient late payment and debt collection processes.
You can reduce late payments and unpaid bills by making it easier for customers to pay. Most of the time, clients are willing to pay but are not able to because of various hindrances like busy schedules and inaccessible payment methods.
Introduce various payment options. There are plenty of convenient and quick online payment gateways like PayPal, Stripe, Payline, etc. Accept checks, credit cards, bank payments, and mobile wallets. Likewise, there are invoicing solutions that come equipped with the payment portal. Usually, digital payment platforms come with processing fees and other charges. It’s generally a reasonable trade-off considering the advantages of online payment gateways.
Bill promptly and properly
Alongside improving the payment process, you need to send invoices promptly; ideally, right after work is done or the product is delivered. The earlier you send an invoice the fewer chances of forgetting it. Likewise, it gives your customers plenty of time to prepare.
Developers of Kansys, enterprise billing software recommend shifting to digital invoicing. Online invoices are easier to prepare, send, and track. You can also schedule recurring invoices for subscriptions. Do away with paper invoices that are cumbersome, costly, and time-consuming.
Make sure your invoice contains accurate details to avoid any disputes. The invoice should include your contact information so that customers can easily reach out to you in case there are questions. Disputes can cause delays or even non-payment, hence must be avoided.
Invest in your staff
Sometimes it is not the process or the IT solutions that are problematic. It can be your staff. They might not have the appropriate competencies to manage the accounting cycle, thus resulting in financial losses.
This makes it important to invest in qualified staff and continuously improving their capabilities. Continuous staff development increases workforce efficiency and productivity. While this might mean additional expenses, its long-term benefits outweigh the additional costs.
Investing in your workforce will not only ensure effective accounting processes. It will also improve employee satisfaction and keep turnover low. Most importantly, your workforce is a vital piece in your overall business success.
Hopefully, these five tips can help you keep financial losses in check.