The Secret to Seamless Cash Flow & Credit Management

Tally Solutions |Updated on: March 16, 2023

• What is cash flow management?
• What is credit management?
• How does credit management improve cash flow?
• How TallyPrime helps in seamless cash flow & credit management

Seamless cash flow and credit management are at the core of running your business smoothly without any hiccups along the way.

What is cash flow management?

Cash flow management ensures enough funds are coming into and going out of your business. You need sufficient cash inflows because you need to keep your business running, pay your employees, and ensure equipment is being maintained.

Cash outflows are also important as you need to invest in better procedures and equipment to speed up the current processes. Maintaining the optimum cash flow levels is important in India, so your business generates sufficient funds.

What is credit management?

Credit management is the process of analyzing and reviewing a business's creditworthiness to determine how much credit you can extend to them. You may be dealing with suppliers, customers, debtors, and clients to whom credit must be extended.

A thorough credit management system ensures you are collecting payments timely, calculating interests correctly, and avoiding a bad debt situation to arise. The success of managing credit depends on a business’s ability to determine credibility.

How does credit management improve cash flow?

Credit management and cash flow management are linked as cash flow can be significantly improved when you master managing credit.

When you are managing credit, you need to make sure you are being charged correctly by your suppliers. This is the case; you are less likely to fall into cash flow problems as you know the prices of what you procure from them. This keeps your expectations realistic and ensures proper cash flow.

1. Tracking and collecting outstanding invoices timely

An important aspect of credit management is to track and collect outstanding invoices promptly. When you closely monitor payments, you know when to collect payments and follow up with those who haven’t paid until the due date. This ensures there is always sufficient cash in your business and reduces the chances bad debt.

2. Better and regular credit checks

Routine credit checks are a part of managing credit. Even though, at times, it may seem like allowing customers to pay a month or so later is a good idea, it isn’t. This is particularly true for those customers who habitually pay later rather than sooner. By performing credit checks, you ensure you are abiding by the credit management strategy you built. This improves cash flow as it ensures you are collecting payments timely.

3. Payment reminders

Credit management also includes doing all you can to remind your customers to pay. One method is through payment reminders. Sometimes, customers forget that they need to pay. Sending them a friendly yet information-packed reminder ensures they make the payment at the earliest. This keeps the communication lines open and builds trust between the two parties. By doing this, you are initiating timely payments, thereby improving cash flow.

How TallyPrime helps in seamless cash flow & credit management

TallyPrime is a business management software that helps you conveniently manage cash flow and credit to improve timely payments, maintain healthy cash flow, and control credit. Its advanced features ensure you have complete control over collecting payments.

1. Managing your receivables and payables is crucial for all businesses

TallyPrime automatically generates a unique bill reference that can be used to manage all your outstanding payments. This proper way of receivables and payables management ensures you receive and pay on time thereby improving your business functions on all levels. You can track the people who owe you and to whom you owe so you are always aware of your cash flow and credit situation at any given moment. These insights promote better funds management.

2. Ageing analysis

An ageing analysis report shows receivables based on age and helps you build your business credit policy as you know which customers are continuously paying past the invoice due date. You can generate an ageing analysis report with TallyPrime so you know which pending bills have been sitting for a long time.

By knowing pending bills particulars, you can follow up and ask for payments upfront, improving your business cash flow. You can generate the report by choosing the ageing style and interval as per your preference thereby giving you more control over report generation and better comprehension.

3. Multiple bill settlement

Tired of bills piling up and forgetting to pay them promptly? TallyPrime’s multiple bill settlement option takes care of your pending bills problem by enabling you to pay in bulk. You can select the bulk payments feature and pay multiple bills in one go for a faster and more seamless experience. It ensures you have no more pending bills and clears them in one go. It is a simple and efficient method for paying bills before the due date.

4. Cash and fund flow management

Cash and fund flow management involve monitoring and evaluating the cash inflows and outflows and then balancing them. TallyPrime enables you to get the status of your cash flow, and funds flow in a single click by generating a report.

Once you can track your cash flow, making decisions and planning to spend becomes easy for the most beneficial reasons. It helps in better resource allocation, so your business is always running smoothly without any issues. It can be used to prevent cash flow problems that can arise in the future, thereby ensuring sufficient cash is always available at your disposal.

5. Cash flow projection

Cash flow projection is one of the most important aspects of cash flow management.

TallyPrime’s cash flow projection is reliable, and you can use it to make decisions that will make your business spend cash optimally. When you anticipate a high cash inflow, you can set the cash aside for later use or plan to invest in new equipment. When you anticipate low cash inflow, you can focus on maximizing operations with minimal resources.

By knowing what can occur, you are better prepared for what the future holds.

6. Seamless interest calculation

With TallyPrime, you can precisely calculate interest using simple or compound interest formulas automatically, so the right people are paying the right amount when they pay late. This helps with proper cash flow and credit management.

7. Superior credit control technique

TallyPrime enables you to perform credit control easily. You can set the maximum credit limit per customer after determining credibility, so you are always aware of the credit limit before you generate a sales invoice. With an advanced alert feature, you can find out if the customer buying your products has any previous unpaid bills. If so, you can ask the customer to clear the unpaid bills and proceed with the billing process.

Read More:

• How Is Free Cash Flow Defined And Calculated?
• 5 Cash Flow Forecasting Mistakes That Small Businesses Do