Accelerate receivables to get cash faster.
Whether it’s that first dollar bill that winds up framed on your office wall or a wire transfer from your newest client, how you manage your accounts receivables is critical to cash flow in your business. Are you receiving as much money as you should? When you should? As efficiently as you should? If you take a closer look at your accounts receivables, you may find a wealth of capital tied up in the very process that’s supposed to be bringing in money. When you’re searching for ways to optimize your working capital, your accounts receivables process is a great place to start.
Every business, every industry, is different, but all of them have their inefficiencies that can lead to otherwise useful capital getting tied up or lost inside the accounts receivables process. For example, your policies and practices are a good starting point — where it’s easy for a business to unknowingly leave capital tied up in accounts receivables.
- Review collections policies. Many companies have policies in place governing accounts receivables, indicating when to bill and when to collect. But often these policies aren’t written with optimizing working capital in mind.
- Limit free credit extensions. In the pursuit of new business, a company may offer deep discounts, extremely favorable payment terms or ignore late payments, in effect extending free credit to the customer. There’s always an argument for winning new business, but if all this money is on the balance sheet and not in the bank account, it affects the company’s operations, limiting its ability to invest in new equipment, new opportunities and new products — or even to meet its own obligations.
Even with the proper policies and practices in place, there are several reasons why capital can still get “stalled” in accounts receivables:
- Manual and/or paper-intensive collection processes
- Lack of timeliness in making check deposits
- Inefficient posting and reporting; therefore, lack of visibility into the cash position
- Late payments from customers resulting in the need for costly collection services and further delay
Understanding how much you can realize through restructuring your accounts receivables process — and how much your process may need to change — begins with identifying the current state of collecting your receivables and which best practices will benefit you most. The working capital management advisors at Texas Capital Bank can work with your team to identify optimization opportunities, implement best practices and make the most of your accounts receivables. You’ve earned your money. It’s time to capitalize.
Key considerations for faster access to cash
Properly managing capital means finding a way to accelerate receivables to make assets liquid and available when you need them. The best way to do this varies from business to business and from industry to industry, but here are some things to consider as you begin the process:
- Utilize more electronic types of solutions, such as remote deposit, lockbox, image cash letter or merchant services.
- Your best options for accounts receivables solutions will often depend on the volume of receivables, the manner in which your customers pay you, and your industry.
- There is not a “one size fits all” solution — a working capital expert who truly understands your end-to-end receivables process is the key to identifying the best type of solution(s).
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Texas Capital Bank will not be responsible for any consequence of reliance upon any opinion or statement contained herein nor for any omission. Neither Texas Capital Bank, nor any of its employees provide tax or legal advice to outside entities.