https://www.globalbankingandfinance.com/what-is-accounts-receivables-on-the-balance-sheet/Successfully managing your cash flow is your core purpose as an entrepreneur. If you maintain a positive cash flow, you’re doing good business. However, nothing lasts forever. Even the best companies sometimes get out of sync with their beat.
Often, it might not even be your fault. Business is an ecosystem. An event into the other side of the country or even city can disrupt your flow and throw you off balance.
For such an occasion, here are 25 ways you can help improve your cash flow and continue with business as usual.
Managing your accounts receivables:
- Send out your invoices as soon as possible
One of the biggest problems you’ll face is invoices being paid with delays. For that reason, you should always prepare them as your work goes by. Send them the minute your product or service is completed and collected.
- Chase your unpaid invoices
Always keep track of your unpaid invoices. Make the best effort to continuously chase your debtors and remind them to pay in time. It’s alright to pressure your clients if they overextend their payment period.
- Schedule step payments for long lasting contracts
If work on a long contract, or deliver a big shipment, try to negotiate step payments throughout the course. This will enable you to access your funds as you need them and maintain your business operations.
- Offer discounts for a quick repayment
Making discounts might sound like a counter-intuitive thing to do. But just consider how late payments will affect your cash flow. Most of the times a stagnated cash flow will result in either lost money or lost opportunities to earn money. Thus, making a small discount might actually even save you funds.
- Introduce an interest for late payers
Often, you’re able to include a penalty clause in your contracts with your clients. Whenever they overextend their payment period , you will gain interest on your earnings. These are rather rarely enforceable. However, having it on paper will create a passive pressure for your clients to pay in reasonable time.
- Use an invoice finance company
If you have no quick way to access your account receivables, you can always turn to a factoring company. This is a way to receive funding based on your unpaid invoices. You will pay a small fee on your total earnings, but you will gain 70%-90% of your invoice values in 24 hours. Thus, you should have enough money to continue your operations.
Manage your outgoing payments:
- Schedule step payments for big purchases
If buy a big stack of materials or hire sub-contractors, making a big payment might dry you out of working capital. Try to negotiate a step payment plan with your vendors. Most of the time they won’t object if they are receiving scheduled repayments.
- Negotiate billing dates to coincide with revenue payments
Sometimes your earnings arrive just a few days late to meet and cover your own business expenses. Usually, you can foresee such discrepancies. Negotiate a billing date with your vendor that will factor the date your funds arrive.
- Research better prices or deals for your most common purchases
Your cash flow problems can be simply because you buy from the wrong supplier. You might pay unnecessary high prices for your stock. Research your supplier options. Find out if you’re not driving yourself out of business.
- Negotiate discounts from your vendors:
If you have a good relationship with your vendors, perhaps you can use that to nudge their prices a bit. Perhaps, you might negotiate yourself a discount for regularly paying early. Or, you might offer them a payment in cash for a slightly reduced price. Cash payments are always more valuable than other types of funds.
- Make “on time” payments to avoid suffering interest
Plug out potential funds sinkholes by continuously repay all your debts. Mortgages, business loans and credit cards should be repaid in the order of closing out the smallest debt first. If relatively equal, target the one with the highest interest rate.
Managing your existing funds:
- Keep working capital in an interest-bearing account
You can store your working funds into a checking account that grants a small interest for you. There is often a requirement for minimum balance at most banks. But, with careful moderation, the interest can offset some processing costs throughout the year.
- Keep an emergency fund at a hand’s reach
Emergencies tend to occur when you’re least capable of handling them. When they do, you’d better be prepared to dish out a chunk of cash. This way your business can continue operations and you can work to recover those. Otherwise, you’re faced with having to withdraw emergency loans with huge interest rates.
- Avoid large, long-term savings accounts
If you put most of your capital into long-term saving accounts, you will receive the most merit out of your funds. Yet, if something happens and you need them to cover up some business costs, you have a problem. Most good interest accounts have penalties for breaking the term. First, you lose all your accumulated interest. Then you’re likely to suffer real financial loss in the face of penalty interest.
- Avoid loans if you’re barely meeting business ends
If you’re barely on top of your cash flow, it’s a bad idea to take on a loan, unless absolutely mandatory. If something bad happens (and, at some point, it will) you’re going to have a rough time. A loan will help drain your balance. Unless you find a way to inject funds into your business you might go into bankruptcy.
Managing your business assets:
- Rent out unused operational space
Maintenance for your empty warehouses might not be much, but it’s still coming out of your pocket. If you plan on using them again soon, just rent them out for profit. Otherwise just put them on the market and channel your cash somewhere else.
- Liquidate unused or dated equipment and vehicles
Dorman equipment that doesn’t meet your business requirements anymore should be sold or salvaged. If you’ve outgrown your old vehicles or machines, you should release their capital. Use that to fund your upgrades or just add to your savings. In any case, unused assets require storage and maintenance, while they don’t generate profit.
- Balance your excess of stock and raw materials
It’s often difficult to judge how much raw materials you need for your production. Sometimes, sales might overcome your estimates and you will find yourself in a shortage. Without the materials to continue production, you will lose out on potential sales. Yet, buying more than you can put to use can be even worse. Excess stock quickly loses its value. It might even become obsolete by the time you’re able to effectively use them.
- Sell inventory you can’t use effectively
When you own stock you can’t or won’t use for whatever reason, find a way to sell them as fast as possible. The price of any equipment and material in stock can only go down. Sell them while they still have decent prices, before they become obsolete and worthless.
- Optimize inventory and storage
If you often find yourself with obsolete stock, maybe you should rethink the way you store and use it. Perhaps, a new inventory system can reduce the amount of excesses. Thus, also reduce the size of purchases. Same goes for storage. Maybe you can squeeze your assets effectively and reduce the storage space and save on rent.
- Setup your tax planning as early as possible
Tax can sometimes overwhelm an enterprise that otherwise maintains a good business flow. There are many subtle tricks to minimize your taxes, while maximizing your gains. The most notorious is claiming your business expenses. There are a myriad of expenses that you can claim and reduce your taxable profit.
- Repair and renovate before you buy
Try to make it work with your current equipment. New equipment is expensive and you don’t have time to play on the market. Swapping old for new at a low price is a great deal, but don’t make this your priority. Your priority is to have your equipment working to continue your sales and earn profit. Repairs and proper maintenance gets you there faster.
- Buy used equipment if possible
If you hunt for related businesses in foreclosure or bankruptcy, you can find perfectly good assets for pennies. Even if you don’t, you can almost always get decent machines at fraction of the cost of brand new ones. These can serve you well and last years, without breaking the bank.
- Delay upgrades until your work requires
Tech and vehicle upgrades are overrated. Scrape away the marketing lustro and you will see that new upgrades rarely add enough value as to pay themselves off. Of course, if you do happen to pile severely outdated assets, your own operations might require you to upgrade.
- Don’t forget about salvageable scrap
Do you have old assets laying around that have practically zero market value ? Remember that they are probably still salvageable. Try to identify parts that you can sell separately. Or, you can use in repairing your other vehicles and machines. The rest, you can sell for scrap.
There go our 25. There are many more tips and tricks to achieving a balanced and stable business cash flow. Do you have a trick that works for you ? Have you hacked cash flow management ? Share your knowledge in the comments below !
Factoring Solutions is an independent broker for invoice finance companies and services. We work with business owners and provide free consultation about their factoring needs. Then, we provide a no obligation recommendation to their choice of factoring company.
The value of digital identity in payments
By Vince Graziani, CEO, IDEX Biometrics ASA
In ever more challenging times, the payments industry needs to maintain trust by finding a way to protect consumers from the constant threat of payment fraud and theft. Consumer’s wishing to limit physical contact during the current pandemic has led to the popularity of contactless payments which has accelerated in multiple territories.
In the US, one in five shoppers have made a contactless payment for the first time during the pandemic according to research published in August by the National Retail Federation and Forrester. The bad guys have unfortunately taken note. This has led to a real need for the industry to fight back with enhanced security.
At the 2019 Money2020 Europe conference, there was a universal call for a comprehensive form of digital identity (ID) to enable digital payments. A form of digital identity that would make cashless payment interactions – secure, intelligent, efficient and private. The feeling was unanimous: without functioning digital ID, the payments revolution will stall.
Unlocking the payment ecosystem
In an increasingly connected world, consumers find themselves needing to authenticate their identity daily. Whether that be with financial institutions, retailers, government departments or healthcare providers. Yet, it is rarely known where consumer data is stored, how secure it is or how it may be traded. Privacy regulations such as the European Union’s General Data Protection Regulation (GDPR) have attempted to restore some trust, but the industry still has a way to go.
Currently, authentication is fragmented and unwieldy. It requires a mix of hardcopy documents, online login credentials and digital wallets. This is not only frustrating for consumers but leads to the reuse of passwords and PINS that make the user vulnerable to fraud. Mastercard believes there is a clear need for a verified identity that is accepted globally and across multiple digital touchpoints and doesn’t involve aggregating more information in potentially vulnerable data stores, but instead gives the individual control over their identity data.
An integrated digital ID scheme would enable the payments industry to fight fraud on a global scale. It would also meet the pressing need for a payment authentication system that consumers can access anytime, anywhere, and on any device. This joined-up approach is vital to ensure no consumer is left behind as the world continues its digital transformation.
Providing access to a singular, unified digital ID will not only streamline the identity process, but also unlock new and enhanced consumer experiences during this digital transformation. Particularly in the new breed of smart buildings and cities, where everything from travel to payment systems will be connected to a user’s identity.
What form should our digital ID take?
While the need for digital ID is well established, the form it will take is less clear. There are two main challenges that payment providers need to overcome with a potential new identity solution: onboarding new users and ensuring the digital ID is compatible with all transactions.
Placing individual consumers at the centre of their own digital interactions will ensure confidence and broader adoption of new technology payments and services. Yet, for this to be successful, the payments industry must adopt a process that is simple, familiar and easy to understand.
Fingerprint biometrics as a digital identity
The use of fingerprint authentication to unlock a smartphone is now deeply entrenched. As far back as 2016, 89 percent of users with compatible iPhones were using fingerprints to unlock their devices. The solution for a frictionless onboarding has been at our fingertips the whole time.
Payment providers can incorporate fingerprint biometric sensors directly into their new breed of smart payment cards. A biometric payment card may be a new concept, but payment providers and retailers across the world are already using contactless card technology in the payment process, so it is the next logical step. Consumers are now used to carrying a card and tapping it for contactless payments. Plus, as we have seen, consumers are used to using their fingerprint as an authentication mechanism. Perhaps biometric cards could be the catalyst for financial inclusion desired by the World Bank, as they don’t require the ownership of expensive smartphones in developing nations.
Building a chain of trust with biometrics
Continuous developments in payment regulation mean that secure authentication is imperative. Under the second Payment Service Directive (PSD2) European banking regulation, all payment transactions will soon require Strong Customer Authentication (SCA) to validate users at the point of transaction to reduce fraud and increase security for customers. SCA requires two forms of authentication for every transaction above the contactless limit. While one is generally something you have like a smart card, the second can be something you are like a fingerprint. Using a fingerprint means that it can be used across multiple platforms and is always at hand. There should be no trade-off between convenience and privacy and fingerprint biometrics delivers on that expectation.
Biometrics can play an essential role in digital ID, significantly limiting exposure to potential fraud and criminality. The addition of a biometric sensor onto a payment card creates a secure ‘chain of trust’ that indelibly connects the user to the card. Furthermore, digital ID has the scope to be extended far beyond payments and used as a unique identifier in areas such as access, government ID and even across IoT devices.
Securing the future of the payments industry
While the world is becoming ever more cashless, commentators and analysts all agree – without a fully functioning digital ID, the payments revolution will stall. As Tony McLaughlin, Emerging Payments and Business Development at Citi put it recently: “If we fix digital identity, we fix payments”. I couldn’t agree more. Both consumers and the payments industry need a user-centric digital ID that is owned and managed by the individual, so they can unlock the full advantages of a transformative digital payment ecosystem.
Using fingerprint biometrics as a digital ID in a payment card will transform the way people authenticate transactions. This integration would enable consumers to confirm their identity wherever they are, on any device, and across every transaction. It will change the face of digital identity as we know it.
We believe that digital interactions should be privacy-enhancing, secure, intelligent, and efficient. To facilitate this, consumers require a user-centric digital identity that is owned, managed, and controlled by the individual. It is time to place individuals at the heart of their digital interactions globally.
It’s time to press ‘reset’ on travel and expense processes
By Rudy Daniello, EVP of Corporations, Amadeus
Travel & Expenses(T&E) is a large spend category for companies across the globe. In fact, for many firms, T&E is the second largest indirect spend category. While we all know the inherent value personal, face-to-face meetings bring, it’s important to quantify and manage the cost, especially in today’s climate.
While business travel has slowed due to COVID-19, many companies have accelerated their digital transformation during this period, especially in the way their teams work. One area that is under the spotlight as organisations look to transform digitally and control costs and processes better, is T&E.
Poor business travel spend management can frustrate staff, and lead to cost and productivity inefficiencies. Within the context of COVID-19, controlling T&E spend is likely to be even more important, so companies need a clear strategy around their travel and expenses.
To understand how organisations were assessing their T&E at this extraordinary time, Forrester Consulting conducted research on behalf of Amadeus, surveying more than 550 key decision makers involved in T&E solutions at large organisations worldwide.
The report, titled Digital Transformation For Travel & Expense: Balancing Process Efficiencies, Compliance, And Employee Experience highlights the challenges organisations face as they assess their T&E systems and processes before business travel picks up again.
The good news is that nearly three quarters (74%) of respondents agree that the improvement of T&E management processes and tools is critical to reducing costs, increasing efficiency, improving employee engagement, and forms part of their digital transformation.
All of these factors are key business objectives, so how can organisations address their T&E?
Focus on Systems
The research found that a lot of organisations are still relying on outdated systems to manage their travel and expenses. More than one in five (22%) of centralised companies still use spreadsheets to track expenses and just 15% of organisations use a cloud-based T&E solution.
Many decentralised companies also still rely on manual processes – either fully or partly – for their T&E. These outdated processes and systems add pressure on staff, managers, auditors and accountants. Reassess T&E Processes
Having the right systems in place will help rethink T&E processes, from researching hotels and appropriate transport, to making expenses claims post-trip. Travel managers surveyed difficulties around compliance-related expense tracking, reconciliation and auditing as a key challenge.
Three quarters (74%) of travel management leaders want to increase automation to reduce their reliance on manual processes. However, one in five (20%) organisations do not feel they are getting the analytical and reporting capabilities they need, despite data being a core priority.
The research shows that Human Resources (HR) and IT have key roles to play in redefining their organisations’ T&E processes.
Enable Smarter Booking
The research also finds that T&E leaders want to be able to manage the huge amount of content out there so that they can make clear decisions when making travel bookings. Multinational organisations need a global solution so that they can access the best deals and make more informed business travel booking decisions.
Integrated T&E solutions deliver cost and efficiency benefits
According to the research, those organisations that use an integrated T&E tool are much less likely to receive complaints from their traveling staff. More than a quarter (27%) of organisations that use an integrated T&E solution reported zero complaints from employees.
Integrated T&E solutions are essential for companies as they help their employees, take advantage of the best offers for the business trip. They also streamline expense processes, making it quicker and easier to claim and have their expenses approved and paid back.
Firms that do not have integrated T&E solutions report a 29% increase in delays in reimbursing expenses. Almost all (96%) of organisations interviewed that use integrated tools are satisfied with their T&E processes. Nearly three quarters (73%) of them even plan to expand or upgrade further.
Improving T&E is a team effort
What the Forrester Consulting research demonstrates clearly is that there is consensus across the board that T&E systems and processes can be improved.
Three quarters (74%) of IT leaders are focused on improving end-to-end experience of T&E processes, and 73% are committed to improving integration between T&E tools and other systems (73%).
And it’s not just IT leaders who see the value in integrated T&E solutions. More than four out of five procurement managers see improvement of T&E tools and processes as a key part of their organisation’s digital transformation, the highest of any group interviewed by Forrester.
While online conferencing has become the norm for many organisations, nothing can replace the value of face-to-face meetings. When business travel picks up again, companies with integrated T&E systems and processes will quickly see the benefits.
Covid-19 and the rise of remote payment fraud: how do we catch a digital thief?
By Evgenia Loginova, co-founder and co-CEO of Radar Payments
Covid -19 is finding different ways to hurt our finances – and like the virus, the threat is invisible.
Each time we tap our payments cards or make a purchase online, there’s always a risk of getting caught out by a digital fraudster. Yet during the global pandemic, the issue has not only escalated, but the ways in which people are conned have changed to reflect new social distancing and lockdown behaviours.
Indeed, the crisis has transformed the way we buy and shop – and those that are being targeted most are the millennial generation.
What are we doing differently?
It’s all down to the way we are interacting with service providers.
Since the World Health Organisation issued a pandemic in March, global payment fraud went up 5% with 100 million suspected fraud attempts from the period between March – April.
According to TransUnion, the firm analysing the data, billions of people around the world have been forced to spend time at home, which has led to industries such as financial services, ecommerce and healthcare to experience disruption in ways that have not been seen for generations.
This is due to the spike in online transactions, as more people adjust to the new normal of spending less time at the shops and more time doing everything on their digital devices. And with so many transactions shifting online – fraudsters are spending more time there too. These culprits are fully remote and are always on the lookout for vulnerable victims – as well as vulnerabilities within the payment systems.
Digital savvy criminals
Businesses that come to grips with the problem will manage to stay afloat – but they won’t be able to do it without fraud prevention tools that can identify suspicious activity without adding friction to the customer payment experience. In other words, customers must be protected from theft – as well as the truth. They shouldn’t even know that they’re under attack in the first place. It’s all about prevention- or at least as much as what technology can provide.
Without some technological intervention, there won’t be prevention, as companies simply cannot keep up with the proliferation of digital thieves. Culprits are operating individually or in criminal gangs or both – and usually in countries that are often forgotten by global leaders. For example, the telecommunications sector witnessed a 76% increase in card fraud a month after the global pandemic was declared – and the top country for suspected fraud origination was Timor-Leste – how many people even know where that is? (East Timor – formerly part of Indonesia, if you must ask!). Financial services saw an 11% increase in identity theft that same period – with most suspected culprits based in war torn Syria.
Despite their location, fraudsters are quickly adapting to consumer behaviour, and finding ways to attack. With less in-person transactions taking place, criminals are doing things like infecting online points-of-sale with malware that enables them to skim credit card details of previous customers.
From our experience with our fraud detection networks the numbers point out that missing card fraud, in particular, has shot up by 70% over the past few months. This is where people’s card details are being used by criminals to make purchases, when they are not in possession of the card. They’ve just stolen the numbers and additional critical security information such as expiry date and CVC2/CVV2.
Identity theft is also on the rise, as well as phishing and social engineering attacks. For example, in the UK alone there’s been a rise in criminals impersonating trusted organisations like the NHS or HMRC to trick people into going online and paying for services that are fake or giving away their money and information to charities and other organisations that are fake.
Local councils in Britain have noted a 40% increase in reported scams since the start of the pandemic, while Citizens Advice believes one in three people have been targeted by a Covid scammer.
This is a problem that is too big to ignore. The moment the fraudsters have your payment details – whether they’ve stolen it or you’ve given it to them under false pretences, the problem leads to losses for the victim and the businesses and organisations too.
With Covid and lockdown, fraud has gone fully remote and everything from e-commerce and digital banking has been a target for abuse.
In this ‘new normal’ world we find ourselves, the prevention of suspicious transactions through customer profiling and enhanced analytics, use of AI and machine learning models becomes very important.
Fortunately, digital theft is now being taken seriously. Spending on security has skyrocketed in recent years, and the sector supplying protection predicted to grow by $6 Trillion by 2021.
Businesses that survive the pandemic must be able to anticipate and strive to block 100% of the digital theft they encounter. But to win the war against these online criminals they require a robust security strategy.
Here are some tips to consider.
Security policies should be enforced internally and across payment channels and distributed networks. This includes the core and cloud networks as well.
Security gaps should be closed. A lot of risk can be mitigated by performing regular checks and plugging security holes, settling on a unified security framework based on interoperability, centralising visibility and control, segmenting the network to restrict the fluidity of malware and high performance, and deep integration.
Invest in AI capabilities. Artificial intelligence possesses the sophisticated power to replicate the analytical behaviour of human intelligence, as well as enable decision-making in real time and offer predictive security notifications.
Investing in AI based security systems can significantly reduce digital attacks and spot suspicious activity. The best ones are integrated with artificial neural networks (ANN), which combined with deep-learning models, can speed up data analysis and decision-making. It also enables the network to nimbly adapt to new information it encounters in the network.
Prevent fraud in online and then investigate. It is crucial to stop fraud before it happens. As most of the payments became remote, reaction should be super fast: high-risk transactions should be declined, low-risk passed with no friction and suspicious challenged. This raises the importance of finding the balance between customer experience and risk mitigation as never before. And even with AI and enhanced analytics for complex cases an expert with natural intelligence should be equipped with all needed information for relevant and adequate decision-making.
Digital crime won’t disappear as long as there’s an opportunity that criminals can exploit. As the world braces for a new wave of lockdown measures, businesses operating in the online sphere must remain vigilant and prepare for more attacks – or face losses that could be impossible to recover from during these challenging economic times.
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