5 tips to optimize your customer account and better manage your cash flow
lucas-fontaine
•
Jul 8, 2024
Effectively managing cash flow has always been at the heart of business concerns. This is even more true in the context of B2B activity. With larger amounts and long payment cycles, keeping control over expenses and revenues can quickly become a headache. To avoid disasters, many practices are available to companies to better manage their cash flow, and client account optimization is one of them.
Let's discover in this article the best practices to apply in order to gain efficiency in managing client accounts and their impact on a company's cash flow.
1. Ensure the solvency of your clients
Client account optimization is not only about financial teams. It starts right from the prospecting and sales process, often carried out by the sales team. It is therefore crucial that your sales policy is clear and well-defined internally. You will be able to adjust your payment terms based on the solvency profile of each of your prospects or clients.
Assessing a potential client's solvency means measuring the financial risk they represent. The goal is to determine whether they will be able to pay their invoices. There are several indicators that can be considered in this analysis (solvency ratios, repayment capacity, etc.). It is also possible to consult official resources such as the DGCCRF website, which lists all companies that have been subject to sanctions for failing to meet payment deadlines. Finally, word-of-mouth remains an undeniable asset. Inquiring with other suppliers of the company can provide concrete information about their payment behaviors.
With clearly defined payment terms and a systematic solvency analysis of each client, it becomes easier to reduce the risk of unpaid invoices. If a client represents too great a risk, it may well be preferable not to continue working with them.
2. Have an efficient billing process
An efficient and transparent billing process is very useful for optimizing client accounts. It is indeed possible to take action upstream to prevent late payments.
In addition to containing all information related to the product or service sold, an invoice must be easily understandable to avoid any confusion or misunderstanding later on. To achieve this, it is important to mention:
The general terms of sale
The payment deadline granted
The payment methods
The contact details of customer service for questions and complaints
💡 To avoid any disputes with the client, the applicable late penalty rate can be mentioned at this time.
Beyond the content of the invoices, having the shortest possible delay before sending them to the client is crucial for the continuation of the process. This helps avoid starting the business relationship on the wrong foot due to an incomplete or late invoice. This practice also ensures better visibility and predictability of cash flow, promoting efficient cash flow management and more informed decision-making regarding credit.
3. Monitor and analyze client accounts in real-time
Real-time monitoring of client accounts and data analysis prove to be essential assets for optimizing cash flow management. By adopting a proactive approach to monitoring customer debts and received payments, it becomes easier to maintain increased visibility over cash flows and manage the risk of unpaid invoices. Quickly identifying debtor clients allows for recovery actions to prevent payment delays from accumulating and weighing on cash flow.
To facilitate the visualization of this data, there are various strategic indicators:
The accounts receivable represents the total amount of debts that a company holds against its clients, that is, the sums due for goods or services provided. It is generally segmented according to the different statuses of the relevant invoices (overdue, not overdue, in dispute, awaiting payment…).
The aging report provides a visualization of client debts based on their age. This aging distribution makes it easier to identify invoices that need to be prioritized for follow-up.
The average payment period gives insight into clients' payment performance. The quicker a client pays their invoices, the lower their average payment period will be.
The cash receipt forecast allows for anticipating upcoming cash inflows. By basing it on the actual payment periods of a company’s clients, it is possible to predict the time needed before receiving a payment.
By analyzing this data, companies can develop more precise and relevant cash flow management strategies. For example, they can adapt their follow-up strategy based on each client's payment behaviors. This helps increase efficiency and expedite collections.
4. Automate client reminders
The automation of sending client reminders is a major lever for effectively optimizing a company’s client accounts. This strategy has significant advantages in terms of operational efficiency, reduction of payment delays, and improvement of relationships with clients. In this regard, many tools offer an intuitive solution to facilitate this complex and time-consuming task of client reminders.
Firstly, automating reminders saves valuable time. Instead of mobilizing human resources on manual and repetitive tasks, your teams can focus on higher value-added missions. Sending reminders according to a predefined action plan eliminates any risk of forgetfulness or delay. In fact, a client who is not reminded is even less likely to pay. Therefore, it is very important to be strict in the reminder process by not letting any delays slip by. Every overdue invoice must be followed up to be paid.
Another key aspect of optimizing amicable recovery is personalizing reminders. Adjusting the message of each email or letter according to the client's communication habits enhances the effectiveness of follow-ups as well as the business relationship. To facilitate the tracking of all reminder actions taken, it is essential to maintain a complete record of all exchanges: interactions with clients, responses to reminders, payments received, etc. All this information eases the management of client files.
By automating the sending of client reminders with a debt recovery software such as LeanPay, it is possible to reduce the average payment period by 20% on average. This means that overdue debts linger less long, thus weighing less heavily on the company’s cash flow.
5. Be flexible with payment options
Client account optimization doesn’t stop at reminders. The important thing here is to get paid. However, if a client who has just been reminded has no idea how to settle their invoice, then all the previously made efforts go to waste.
It is at the establishment of the general terms of sale that the various payment options available to the client must appear. It is important to offer several payment methods to ensure that at least one of them will suit the client’s habits. From payment by check, to SEPA transfer and through credit card payment, there is no shortage of options and everyone can find something among them.
Finally, the best way to get paid quickly is to make sure you get paid at the right time. For example, it is possible to offer the client to pay their invoices directly from the reminder email. They just need to check their situation and pay in a few clicks the invoices of their choice. Of course, this tip only works for reminders sent via email and through an online payment method.
Client account optimization is a key piece in improving cash flow management as a B2B company. However, implementing all these steps can be complex and require significant internal organizational work. That’s why equipping oneself with a debt recovery software promotes this approach. By centralizing all these actions in a single tool, it becomes much easier to manage client accounts and facilitate decision-making while maximizing cash flow.
F.A.Q :
1. What is client account optimization?
Client account optimization is a set of practices aimed at improving the management of a company's accounts receivable to reduce payment delays and improve cash flow.
2. Why is it important to assess a potential client's solvency?
Assessing a potential client's solvency allows for measuring the financial risk they represent and knowing whether they will be able to pay their invoices. This helps reduce the risk of unpaid invoices.
3. What indicators should be considered to assess a potential client's solvency?
There are several indicators that can be considered in the solvency analysis of a potential client, such as solvency ratios, repayment capacity, payment history, etc.
4. How to achieve an efficient billing process?
An efficient billing process involves mentioning all necessary information on the invoice, such as general terms of sale, the granted payment deadline, payment methods, customer service contact details, etc. It is also important to have the shortest possible delay before sending the invoice to the client.
In summary:
Client account optimization is essential for improving a B2B company's cash flow management.
The best practices include assessing the solvency of potential clients, an efficient billing process, real-time monitoring of client accounts and data analysis, automating client reminders, and flexibility with payment options.
Implementing these practices can be facilitated by using debt recovery software.
