The health of your office technology business is measured by a number of things. The ability to turn a profit is, of course, one major indicator of success. Another might be added headcount year over year. But today, we are going to hone in on one particularly important aspect – where your office technology business stands in terms of cash flow. Because it can be such a telling indicator of the health of your office technology business, we’ll give you a crash course on cash flow and then examine some specific tactics for increasing your cash flow as an office equipment dealer.
But First - What Is Cash Flow?
Let’s take it back to basics and define what cash flow is exactly. Cash flow is the total amount of money being transferred into and out of a business, especially affecting liquidity. At a high level, it is the cash a business has produced for its stakeholders after paying expenses and investing in growth.
“How Can I Improve My Cash Flow?”
In my relationships with our vendors, I find myself engrossed in conversations that expand beyond the topic of financing. As a result, I get to learn a lot about the challenges they face on the daily. Cash flow is commonly mentioned as an area office technology dealers are constantly looking to improve. In fact, cash flow is a common challenge for many business owners, industry aside. Even businesses that are growing quickly and seeing a steady rise in profits year over year can have cash flow related issues. These issues can stem from inefficiencies in many areas of the business - from finance and operations to the business development end of the spectrum. So what kinds of strategies can you, as an office equipment dealer, implement to help prevent or counter these inefficiencies?
Work with a Finance Company to Offer a Leasing Program
Offering leasing as a payment option can definitely speed up your sales process. Offering a customer a monthly payment helps avoid the sticker shock of a cash price, but it can also help office technology dealers stay cash flow positive when adding equipment inventory or acquiring hardware for an upcoming installation. Through a third party lease, dealers are enabled to lease out equipment to a customer and immediately receive funding from their finance company to cover the full cost of the equipment they’ve sold. This means they do not have to wait for the customer to process an invoice for the equipment cost or wait for the customer to pay down an in house rental before they’ve collected the entire cost of the equipment. Taking this approach keeps dealers cash flow positive from day one of the lease contract!
With a finance company like GreatAmerica, it’s not uncommon for dealers to get a credit line approved and their application turned around in an hour or less. Utilizing a finance company allows dealers to bypass the net 15, 30, or 45 payment schedules their customers’ accounts payable departments may run on. It also allows them to receive virtually instant funding once the equipment has been delivered and installed. As an added bonus, any lease documents are prepared by the finance company on the dealer’s behalf, which saves administrative time.
Take a Proactive Approach to Billing & Invoicing
Another factor that can contribute to a positive cash flow is the simple act of getting paid – on time. While some of this does depend on your customers’ ability to make prompt payments, there are still things you, as a dealer, can do improve the likelihood of this happening.
One way is by committing to a disciplined process for sending out your invoices each month – staying consistent will help your customer to do the same. But in order to deliver invoices in a timely manner, your processes must also be running on schedule.
Take meter collection for instance; investing in meter collection tools like FM Audit or Print Audit can automate the collection process and ensure that meter data is collected accurately and consistently. Alternatively, manual collection of meters not only leaves the administrative burden of continuous follow up with the customer, but it also relies on the ability of your staff to enter information correctly and on time, leaving room for mistakes and delays. By automating some of the processes leading up to the creation of your invoices, you’ll ensure you are able to generate invoices that are accurate and on time, which will also prevent delays in payment due to customer disputes on billing charges.
Another way dealers can be proactive is by implementing a process and strategy for accounts that have not yet paid. Consider implementing a process for the consistent follow up on accounts that have gone past due/delinquent to continually push for the retrieval of funds due.
Finally, when you do get paid, make sure your accounts receivable processes are running smoothly – implement an efficient admin process for endorsing checks as they come in, depositing checks, and reconciling money in your accounting system.
All of the above does require expertise in the area of billing and collecting. If you don’t have the manpower or know-how on-staff, working with a finance company that provides back office and bundling services can be a great way to source billing and portfolio management expertise without having to hire headcount. All of these strategies will lead to the timely and accurate delivery of invoices to your customer so you can get paid consistently, resulting in a positive impact on your cash flow.
Make it Easy for your Customers to pay their Invoices
This relates closely to the previous section, but sending invoices on time is only part of the equation. When your customer is ready to pay, are you making it easy for them to do so?
One way to do that is by utilizing automatic check handling (ACH) instead of a check payment. Not only will this make it simple for your customers to pay you, but you’ll receive the money more quickly. You’ll also avoid fees associated with credit card payments, which can dip into your service money and eat into your profits over time.
Additionally, are you putting your customer at ease when it comes to the services and costs included on your invoice? Your customers should have a full understanding of the invoice you will deliver to them before they even get their first bill. Hold an upfront discussion with them regarding their payment terms and ensure they have clarity around how your billing cycle works. By communicating everything, from the frequency at which invoices are sent out, to an overview of what products and services are included on the invoice along with the associated costs, you will ensure all their questions are answered from the start. Making sure your customers are at ease with the charges presented on your invoice can prevent delays in payment due to disputes or confusion that may otherwise arise down the road. It will also eliminate the chance that your customer will be surprised by charges upon receiving their bill, making for a better customer experience overall.
Bundle Equipment and Services Together
I alluded to bundling a bit earlier, but this is a big one and deserves its own section. By utilizing a finance company that bundles the monthly equipment cost with the services and supplies fees that are due to your dealership, you are able to deliver your customers a single invoice solution. By bundling a base service amount and billing overages on a single invoice, you’ll shorten your customers’ invoicing process. While this may seem like it would have a small impact, consider that your customers have their own internal systems of checks and balances that they need to go through before they can pay their bill. If you’re billing for your products and services on multiple invoices, that’s more paperwork for them, which will draw out their process and increase the chance that information will be lost in translation.
Bundling also saves your administrative staff time. If you think about the time it takes to issue an invoice for each and every customer you have, that can add up to a significant time (and money) expenditure. By bundling and letting your finance company take care of the billing and invoicing, you free up time that your admin staff can then reallocate toward revenue generating activity.
Finally, customers are much more likely to pay a lease payment within a 30 day window when the invoice is issued by a bank or leasing company. In fact, over 90% of the invoices to GreatAmerica are paid within 30 days. Utilizing a bundling option through a lease heightens the priority a customer associates with paying the bill, increasing the chance they will deliver payment-on time, every time.
Streamline your Processes
Lastly, are there manual administrative processes that are taking up a lot of your admin staff’s time?
Similar to how bundling can free up admin time, so too, can technology integrations. Consider whether you are utilizing technology integrations, specifically GreatAmerica technology integrations, to the fullest extent. A finance company should be able to integrate with many of the platforms office technology dealers rely on to bill for usage and supplies, like e-automate or Forza. By integrating with our systems, Dealers can automate the manual and tedious steps traditionally involved in service billing, direct deposit and reconciliation of service money. This can greatly increase customer service cash flow as well as your own administrative efficiencies.
Cash Flow is very important to the success of your business – regardless of industry! It’s a common challenge for business owners and even those running large, seemingly successful corporations can experience difficulties in this area. By implementing just a few of these practices, you can impact the cash flow of your office technology dealership in a positive way.
How can we help you?
GreatAmerica can help you offer finance programs that meet the needs of your customers, but we can also help you to streamline some of your backend processes - from our technology integrations, to billing, collecting, and portfolio management! Learn more about our back office services here:
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