How to reduce cash administration and bad debts to improve cash flow

5 min read

If you’re a regular reader of our blog you’re probably already highly motivated to incorporate good cash flow habits into your own daily work priorities. But, if you’re responsible for boosting cash flow across your entire organisation you’ll need to get other managers on board with improving the cash flow position of their respective departments too. How to reduce cash administration and bad debts to improve cash flow. This will be a considerable challenge for you, as their key performance indicators are likely to be centred on things other than their cash flow reports – if they’re running any cash flow reports at all.

To overcome this challenge, we recommend you demonstrate cash flow success in your own backyard (that is, within the finance team that you manage) first. Our three steps to reducing cash administration and reducing bad debts will prove exactly what can be achieved in terms of improving cash flow and put you in a stronger position to influence other managers to replicate what you’ve done.

Step one: Review your internal processes

You’re probably well aware that there’s always scope to improve your internal business processes. Process has a direct affect on the cost of doing business – and, in turn, on your cash flow.

Conduct a review of the processes within your finance department and look for opportunities to improve efficiencies through automation of manual tasks or removal of work duplication. We suggest you start by reviewing the processes behind managing debits into your organisation, chasing late customer payments and the manual effort that goes into your monthly financial reporting.

Step two: Manage processes, not transactions

Show off your management skills by developing, perfecting and managing a reliable inbound payment process that can be replicated again and again without the need for staff to scrutinise transactional details that could easily be automated with the right software. Implementing a repeatable payment process within your team first will give you a chance to test and refine before you roll out the same payment process across all the departments within your organisation. Once you’ve established a process that can be replicated into multiple departments without the need for additional staff you’ll be well on your way to realising significant reductions in cash administration across your organisation.

Step three: Shift debtors onto smaller more manageable payments

More and more companies here and overseas are shifting their customers onto smaller more manageable payments to regulate their inbound cash flow and alleviate customer bill shock (which can be bad for your cash flow and your customer’s cash flow). Over the past ten years, the insurance industry in particular has successfully shifted the bulk of their customer base from big annual bills to smaller pay-by-the-month direct debit payments – saving you the hassle of being first-to-market with the concept.

Consider implementing an automated payment solution (such as direct debit or BPAY) that can debit smaller, more regular payments on the day that they’re due and automatically follow up any bounced payments too. If you can get smaller quantities of cash reliably flowing into your organisation on a more frequent schedule, you’ll be well on your way to significantly reducing any inbound cash flow problems you may have.

Get Everyone in your Organisation excited about cash flow

Spread the word about cash flow and how vital it is to your organisation. Share our cash flow playbook with your staff and start getting everyone thinking about better processes.