Cashflow is Key

This is why cashflow is key

As you know, sales are the backbone of any business, this goes without saying really. But sales and not getting paid on time is probably more damaging than not having the sale in the first place, as you would have incurred costs to generate that sale. Accounts receivable is money which is owed to a company by a customer who has taken a product or service on credit. Knowing who owes you money, on a day to day basis is crucial to ensuring your cashflow is healthy in your business.


I probably sound a bit like a stuck record, but once again this is not easily done if you are leaving your bookkeeping to the year end. With a system like Xero, with its bank feeds and ability to access it anywhere, you are able to apply payments to your customer invoices as the money is received.


This provides the necessary insight for you to have a true picture of who has not paid you and also you can then start being proactive and calculating debtor days showing how long a client normally takes to pay you.


Enabling you to decide whether certain clients may need to pay some or all of the money up front, and not be given terms to pay, or amending payment terms and credit limits.


Xero has built in invoice reminders, which saves time on chasing outstanding debts due to you. This is really powerful, in the past you would have had to have someone manually do this. A costly affair.


Make it easy for clients to pay you. Taking online payments significantly reduces the time it takes for you to get paid. Xero offers a number of online payment options, such as Paypal, GoCardless and Stripe.


While these payment methods do incur charges, they are well worth paying for, if you are getting paid on time. Not getting paid is far more costly.


Reward your customers who actually pay you on time, avoiding the nightmare of constantly chasing late payments. This practice may impact your profit margin but it will help your management of cash flow by giving customers an incentive to pay early rather than late.


Accounts receivable is an important factor in a company’s working capital. If your accounts receivable is too high, it can cause major cash flow issues, which means the business will struggle to meet its own obligations such as paying salaries and suppliers.

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