In the current digital age, it is difficult for businesses to sustain themselves with paper-intensive techniques. It’s time for businesses to upgrade their payment structure in the market. Businesses can utilize virtual payment cards to encourage cashless transactions. Unlike traditional payment methods, virtual payment cards offer more security against transaction fraud. With the help of a virtual payment card, users can pre-set their transactional limit. This card is growing increasingly popular with the upcoming digital trend in the payment system.
Factors affecting the business cash flow.
Before looking into the factors affecting the cash flow, it is important to understand what cash flow exactly means. In simple terms, cash flow is the virtual or physical transfer of funds in and out of the business’s account. Whether a business pays its suppliers or receives payment from the customers, everything comes under cash flow management. The factors affecting cash flow either directly or indirectly are as follows:
- Repayment of accounts payable: The amount that you owe to your vendors is called accounts payable cash flow. This amount needs to be paid by the businesses within a time span of 30-90 days. In the absence of trade credit and payables, the payment for goods and services is supposed to be done on the spot. For efficient cash flow management, businesses need to keep a check on their accounts payable cash flow.
- Purchase and sale of inventory: Inventory refers to the supplies and merchandise stored by the business to meet the future demands of its customers. Purchasing unnecessary inventory results in using up funds that hurts cash flow management. Also, selling inventory improperly would mean that businesses would not be able to meet the demands of their customers. Therefore, the purchase and sale of inventory should be made wisely to ensure proper cash flow management.
- Credit terms: These refer to the duration set by businesses for their customers to initiate payment for the goods and services purchased by them. In case the time limit is set for a longer duration, for, say, two months, it affects the cash inflow in the business. However, businesses can offer trade discounts to promote early payments from customers. Trade discounts help in efficient cash flow management in the company.
- Change in working capital: Higher the company’s working capital, the lower the cash flow of the business, and vice versa. Therefore, it is important to maintain stability in the working capital of a business. The difference between a company’s total assets and its total liabilities is called working capital. Change in working capital is one of the major factors that affect the cash flow management of a business.
How to smooth out cash flow irregularities for your business?
As an entrepreneur, you can soon be bankrupt if you lack proper cash flow management practices in your business. An entire 82% of business failures are brought about by unfortunate cash flow management, as per a US Bank study.
Is it sufficiently simple to acquire more cash than your business is spending? Although it sounds basic in principle, having a positive income envelops considerably more than productivity. By boosting your organization’s income, you can assist your organization with getting benefits quicker, meeting targets in a more limited time, and lowering your working costs. Considering how to further improve cash flow management in your business?
Following are the ways to smooth out the irregularities of your cash flow.
- Develop your Accounts Receivable: By effectively dealing with your accounts receivable, you can keep steady over outstanding invoices and decline the time it takes to get compensated.
One way you can do this is by empowering clients to receive early compensation. For instance, if your payment terms are net 30 days, consider offering a slight rebate for clients paying net 10 days. Early payments can encourage efficient cash flow management.
Offering an assortment of payment choices will make it as simple as workable for a client to pay you, for example, credit card payments or ACH. While these choices might accompany handling expenses, getting cash quicker is better for your business, assuming that income is tight and disposes of time and work spent on assortment. These choices can assist with keeping you from piling up credit card obligations to cover costs.
- Manage your accounts payable process: Laying out and sorting out your records payable cycle will be fundamental for further developing your organization’s cash flow management. Along with a smart accounting department, use accounts payable automation to assist with dealing with your records; it is an efficient solution for efficiency and error-free processing. Then, you ought to speak with your group about which invoices are generally significant so they can be paid first.
Attempt to get to know your sellers and expand payment terms to the extent that this would be possible. Most merchants will ask organizations for a net 30, yet when you develop a positive relationship, they might be more disposed to offer a net 45 or net 60. All things considered, the longer you need to pay, the additional time you get to have cash in.
- Set Inactive Money to Work: Another method for further developing cash flow management is by utilizing inactive money in some profitable areas. Your inactive money will be cash that isn’t acquiring any pay. This means you need to determine the areas where the investment isn’t yielding the expected amounts of profit, withdraw funds from that area and invest in a more beneficial revenue channel. Use the cash to extend your business, use it to diminish your obligations and decrease your interest payments, or put resources into innovation.
Virtual cards offer a host of compelling advantages to improve your business cash flow!
- Security: There is an increase seen in the number of financial information and transaction breaches. Virtual cards essentially decrease risk by wiping out the chance for a fraudster to get their hands on an actual card that may be lost or taken. Furthermore, because virtual payment card numbers are legitimate for a set timeframe and are restricted to specific vendors, regardless of whether the digitized card number is accessed wrongfully, there is moderately minimal possibility that it can be utilized to make fake buys.
- Spending Controls: As well as safeguarding against misrepresentation, the spending controls accessible for virtual payment cards empower organizations to proactively screen and control genuine buys, including employee travel and costs. Since reserves are pre-designated at the hour of issuance and relegated for specific shippers or utilizations, spending directors have a full perspective on how much is being invested in front of energy, as opposed to sometime later.
- Speed: The satisfaction interaction for a customary actual card can require days. Virtual card guarantors can slice the satisfaction time to zero by giving a virtual payment card to a client’s versatile wallet in a split second. This empowers them to start executing right away, giving the early commitment that has demonstrated long-haul reliability and commitment.
Simplifying expense management with smart virtual card features.
Virtual payment cards accompany numerous extraordinary advantages that you can’t get with standard credit or debit cards. These portable spending arrangements permit clients to control their funds, advance spending, and safeguard organization assets easily. With various benefits, many organizations are changing to virtual payment cards.
- Convenience: One of the fundamental benefits of virtual payment cards is that they’re more useful than physical cards. These arrangements permit clients to make speedy and simple payments through their smartphones without the issue of passing around an organization card. You’ll likewise never need to look for your lost credit cards.
- Protection against fraud: Virtual payment cards don’t have magnetic strips and apparent card numbers that are available on physical cards, making it much more challenging for unapproved people. Numerous virtual payment cards likewise require PINs or face scanners before allowing you admittance to your account. Assuming your virtual payment card becomes compromised, you can essentially freeze your account, removing deceitful activities at the source.
- Spending control: Virtual payment cards permit you to set spending limits and pick which shippers you can pay while utilizing them. These controls guarantee that your employees spend organization reserves shrewdly and safeguard your account against hackers. Numerous virtual payment cards additionally empower cardholders to choose a date they might want to close their card or schedule it to close consequently after one payment.
Virtual payment cards are the present-day option for safe and straightforward spending. These versatile payment arrangements permit clients to spend cash from their smartphones as opposed to utilizing an actual card. Virtual payment cards are especially well known with financial service organizations hoping to get momentum in the business. Nonetheless, they likewise benefit organizations across industries.
Dissimilar to physical cards, virtual payment cards have numerous inventive highlights that make a protected, helpful and more controlled spending experience for clients. To get your hands on the best virtual payment cards, get Volopay! It is an all-in-one expense management platform that, along with other premium features like direct accounting integration, reimbursement workflow, accounts payable automation, and multi-currency integration transfers, offers excellent quality and resourceful virtual cards.
With Volopay, you can create unlimited virtual cards, assign specific cards to individual vendors, set card limits, freeze or block the card anytime with just one click and customize it according to recurring payments. Take your business to new heights with Volopay!