When it comes to credit management, one thing you always need to remember is that cash is king. Sure, you need to build strong customer relationships and make sure that you’re providing great products and services – but in the end, if your business isn’t getting paid, the results could be disastrous.
What’s so great about cash? Well, unfortunately, you can’t spend IOUs. (Wouldn’t it be great if you could?!). So, no matter how much money you are owed on paper, if you’re not actually getting those payments in, those outstanding invoices aren’t doing you much good.
Here are just three of the many reasons you need cash in the bank:
- You have money to spend– As the saying goes, you have to spend money to make money, and that means you need to have money. Cold hard cash. Unfortunately, you can’t spend money that a customer owes to you, so you’re going to have to keep chasing them for payment. Of course, once you’ve got that money, you can use it to invest in the business, buy supplies or pay employees.
- You don’t have to worry about credit– If you don’t have cash in the bank, you’ll still need money to spend, and that might require getting a loan from the bank. Of course, banks may not be willing to lend you money (or at least not as much as you want), especially if your balance is low because too many customers owe you money.
- It’s better to earn interest than to pay it– Interest is fab when you’re earning it on cash stored in your bank account. It’s not so great when you have to pay it to the bank because you took out a loan.
So how do you get cash in the bank? Well, assuming you’ve got a strong sales sheet, the key is to get customers to pay. And that goes back to a couple of things we mentioned in the first paragraph: strong customer relationships and providing excellent products and services.
You also need a robust strategy for getting payments in on time, as well as effective policies for dealing with late payments. This includes organising your data well, tracking trends and planning actions appropriately. One thing that can make all of this easier is having the right tools.
For example, Onguard credit management software has been designed specifically to help teams throughout the O2C process. The system makes it easy for you to record and share information with relevant teams, create to-do lists and automate actions. The result? Lower DSO and more cash in the bank.
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