Outstanding account balances, bad-debts, write-offs and weak profits. These are the bane of many a business owners and often the cause of frantic hair pulling—and frequent lunch breaks at the local bar. The question is what adjustments can you make that will improve your company’s cash flow? What business intelligence can you look at that will help you make the right tweaks to your business?
Fortunately for you, and unfortunately for your local bartender, as a BillQuick user, there’s some key information available to you that can help you make decisions that could lead to significant changes in your cash flow.
The Two Metrics
In BillQuick’s Collection Center, there are two key metrics that you probably didn’t know about which can be used to increase your profitability. These real-time metrics are:
- Time Entry to Invoice: The average number of days between the services provided and the invoices mailed.
- Invoice to Payment: The average number of days between the invoices mailed and the payments received.
Your cash flow is directly controlled by these two metrics. If you can lower each of these numbers, you will experience significant improvements in your cash flow over the next year.
Assuming that your monthly billing is $100,000, if your current metrics for Time Entry to Invoice and Invoice to Payments are both 60 days and your annual revenue is $800,000. Decreasing both numbers by 30 will result in a gain of two billing months—bumping your revenue up to $1,000,000. That’s a 25% increase!
Know the Metric, Know the Action
If the bottleneck is in Time Entry to Invoice, it requires an action such as changing the billing frequency or billing practices. If the bottleneck is in Invoice to Payment, you can re-write your engagement letters, fire the bad client or add late fees to future agreements.
Use these statistics to make some small adjustments and see big improvements in your profitability. Before you know it, instead of drowning your sorrows in a bottle—as if you were in a depressing episode of Mad Men—you’ll be buying a round for your co-workers to celebrate a big jump in revenue.