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Boost cash flow with payment time reports.

The organic cash flow is the number 1, non-dilutive, and cheapest funding source.

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Central banks have kept their interest rate decisions unchanged to increase funding costs, slow the economy overheating, and tame inflation. The goal is 2% inflation, which may be achieved in the summer of 2024.

The organic cash flow is now the number one, non-dilutive, and cheapest funding source. Before considering external funding, ensure all is done on your cash flow. In this blog, we have collected three simple tips that you can use to boost your company's cash flow and cash forecast. Cash forecasting is essential right now. Riskrate's ready-made cash forecast models and automation from your accounting program save time and money. Cash forecasts are divided into short-term (less than 6 months) and long-term (more than 12 months) forecasts. With Riskrate, you can also easily plan your financing needs.

What is the difference between short-term and long-term cash forecasts?

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The short-term cash forecast predicts cash daily. You can improve cash flow with KPIs and notifications that tell you in advance if customer payment times change. The dashed line of the cash forecast shows the cash position considering the customer's payment delays.

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The long-term cash flow forecast estimates your company's monthly cash flow, typically 6 to 18 months ahead. It takes into account cash payments from sales and cash payments from salaries and other expenses.

This blog focuses on short-term cash flow forecasting. The following tips can help you optimize your cash flow.

#1 Focus on top-line and customer payment times

Salaries, taxes, and supplier payments are paid with cash flow on sales invoices. The deal is done when the money is in the bank account, so payment time is significant for cash flow.

Customers pay their invoices on the due date only in a perfect world. There may be product problems, the acceptance of the purchase invoices may be slow, or the paper invoice may never arrive at the recipient. Sometimes, the payment delay can be due to the customer's cash flow planning. Only a minor part of our money is in our bank account. Sometimes, a big part of our money is in customers' bank accounts until the sales invoice payment is made in our bank account.

The longer the payment time, the higher the financing costs. We must use invoice financing, a loan, or an overdraft to cover the cash deficit. Financing costs directly affect the result and reduce profits.

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So, rule number one is to focus on sales invoices. Shortening payment terms and minimizing payment delays are two ways to speed up payment time. Riskrate automatically reviews all of your customers' payments and creates a forecast model for the customer's payment time. As a result, you can predict your customers' payment delays to get better cash flow.

#2 Agree on a payment term of 30 days or less

Long customer payment times create problems for the cash flow in both good and bad times. According to the law, the payment period cannot exceed 30 days in Europe. You can read more about the latest research by the Entrepreneurs of Finland here. The customer payment time is, therefore, a number one opportunity to improve cash flow. During strong growth, short payment times bring money to the bank account faster when you spend on up-front costs. During steady growth, a short payment time leaves more money for investments or repaying loans. And during a down-turn, Cash is King.

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Try to agree on a 14-day payment term. If you sell products or services requiring an investment and cash payment, you can also propose an advance payment. Make sure you send invoices quickly.

Riskrate automatically reviews all of your customers' payments and creates a forecast model for each customer's payment time. The Riskrate weekly report tells you where is your money.

#3 React instantly on payment delays with a friendly reminder

The longer the payment delay, the less likely the money will arrive in the bank account. You must react to payment delays immediately. A friendly phone call is often the most elegant way to get payment into the bank account. Finance teams in small and medium size businesses typically send three inquiries to their contact person, and payment inquiries are generally made every seven days.

Riskrate's customer overview is a valuable report in negotiations with the customer.

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