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Some of you may think, isn't it late to discuss this topic? NO, definitely not. As vaccination rolling out globally, it may give us an easy impression that things will quickly get back to normal. But unfortunately, it's still painfully slow in many parts of the world and unequal. But the virus is still there in many different mutant forms like Delta and Delta+ and is expected to have more such mutations.
The world is recovering, but the road to recovery is long and slow. We know COVID-19 took the world by complete surprise. Its been 18 months since this newly identified coronavirus was first seen in Wuhan, the capital of Hubei province in central China, on December 31, 2019, and spread globally. And as long as it exists anywhere in the world, we are still not safe.
The full impact of this pandemic on businesses and supply chains is now visible. Millions of people lost their jobs, thousands of companies were impacted. Global supply chains, from raw materials to finished products, are under stress.
Small businesses and individual professionals are all witnessing the effect that COVID-19 is having on companies throughout the world.
While we all are recovering from crises, we must keep a close watch on the process of recovery and the time it is taking. While supporting and standing up for customers, every business should do it; it's equally essential for you to have a positive cash flow and ensure you don't run low on cash reserves.
The first step towards recovery should be carrying out an up-to-date and detailed investigation on the exact status of working capital your business has right now. Here is what you should consider:
- Have I invoiced all clients who are due an invoice?
- Are there any currently overdue invoices?
- If yes, how long overdue are they, and how much are the amounts?
- How much product stock have I presently got?
- What orders have I recently placed? Are these all essential, or could some be postponed/canceled?
- What is the time gap between paying our suppliers for materials to receiving cash from customers?
- How much money is tied up elsewhere in the business?
Once you gather this information, it's time to act. Here are a few best invoicing practices to help you maintain your cash flow and balance on the road to recovery:
SMEs should aim to invoice clients as soon as their work has been completed. Also, try not to accept longer payment cycle terms.
If you wait for a week or two before you invoice, then all you're doing is delaying the cash to hit your bank account. Furthermore, if there are any problems with payment, they're often harder to sort out as time goes by, further holding up the cash.
Sending electronic invoices is the best and fastest way to receive payment and keep a paper trail. If not already done, invest in simple-to-use Online Invoicing Software today.
Making payments easy for customers
Customers should be able to make payments as quickly and efficiently as possible. Offer online and contactless options. They are efficient, simple to use, and safe during Covid-19 pandemic times. Alongside card payments, online transfers are ideal, but cheques should be avoided as they can result in delays.
Doing some housekeeping
No, we don't mean spring cleaning your desk but looking at how your business can be made more efficient. Why not see what data analysis tools you have, for example, and what reporting systems you use. Do they allow real-time reporting across multiple locations, for instance? Also, see if current cash flow procedures still relevant, or do you need to put some new ones in place?
See what overhead expenses come out monthly, quarterly, or annually. Can you switch utility suppliers or cut back on rent to save money? Can you renegotiate interest on loans or cancel subscription payments for things you don't regularly use?
Communicate clearly and candidly
Customers might have to make tough choices during these uncertain times, and they may have questions regarding cancellation and refund policies. A clear communication strategy will help you to address those ambiguities and help build trust with your customers.
If you offer a self-service portal where your customers can log in and view their transactions with you, you can display information about these policies there.
If you are sending out automatic payment reminders, but your customers are having problems paying, they need a way to contact you quickly and discuss their options. Make sure you include all your contact information in the reminder emails that you're sending.
This extends to cancellations as well—if a customer decides to call you before canceling the service, it's a chance to figure out a solution so you don't lose their business.
Your customers' priority at this moment will be keeping their family and loved ones safe. So your estimates might be accepted a little later than usual, and your invoice payments may come in a little later too. Instead of bombarding customers with multiple reminder emails, consider relaxing these deadlines for a little while.
Allow partial payments for invoices.
As a business owner, your goal is (and should be!) to get every invoice 100% paid on time, every time. However, in times like this, if your customers are willing to make partial payments rather than a single bulk payment, allowing them to do so helps improve your cash flow.
Offer credits and discounts.
By offering discounts for your outstanding invoices, you prove that you care enough about your customers to give them a bit of a break. Alternatively, you can offer credits to be applied on their next subscription renewal.
Pause, don't cancel
With worldwide travel restrictions and shutdowns are slightly relaxed, but businesses are still experiencing slowing down. It's only natural for your customers to cancel some of their services. To keep them from churning permanently, provide an option to pause the subscription for a while instead of canceling it altogether.
Alternatively, you can extend the next subscription renewal date by a month or two without charging the customers. Think carefully before offering this, though, because not all businesses can afford to continue offering services free of charge.
Write off invoices in exceptional cases.
Even after you offer a discount or extend the deadline for payment, if a customer is severely impacted by this pandemic and won't be able to pay you back any time soon, you can try to collect partial payments and write off the remaining invoice amount.
Writing off an invoice is the last resort. To ensure you don't write off too large a portion of your receivables, it's good to regularly monitor your bad debt incurred during this period.
Increase credit limits for loyal customers
If a customer has been with you for a long time and is sticking with you during this period, an increased credit limit is an excellent way to thank them for their business. By increasing their credit limit, you are letting them know that you continue to want their business.
Know why your customers leave
If your customers choose to cancel their subscription, you should definitely ask them if they'd like to give a reason. This information can not only help you understand your customer trends but also reduce your churn. Depending on the basis they enter, you can have your customer support or retention team give them a call and try to win them back.
Though some of these tips might temporarily negatively affect your finances, they can gain you long-term benefits like customer loyalty and customer retention, which will help your business recover more quickly.
To help you implement these strategies, Shimbi Invoice — offer all of these functions.
Did you find these tips helpful? Can you think of some other cash flow strategies that businesses can use to get through difficult times? Let us know in the comments.
Take care and stay safe! We'll get through this together.