Media | The ebb of cash flow

Prudent business leaders have two preoccupations: the top line and the bottom line. Depending on where your organization is in its life cycle, they tend to jockey for our time and attention. When we look at the top line we tend to think about sales improvements and investments in marketing. When we look at the bottom line we think of improving operational efficiencies and cutting expenses. 

An often-underutilized opportunity to improve your bottom line is cash flow management. It might not be as glamorous as an ad campaign or as obvious as cutting headcount, but the quiet and conscientious management of cash flow can have a significant impact on your business. Just because you’re not overdrawn on your line of credit and you can pay your creditors doesn’t mean you’re maximizing cash flow. Waking the potential of this sleeping giant can allow your business to thrive and provide the capital to invest in market opportunities. 

Improve Receivables

The best way to improve your cash flow is to get paid quicker. That certainly is simple in concept, yet much more difficult to execute. There are a few tactics specific to the insurance industry that can encourage prompt payment. Offering strategic payment solutions can be convenient for your clients and ensure your receivables move to the revenue side of your profit and loss statement as quickly as possible.

Credit Cards

Consider accepting credit cards as a form of payment. Whether it’s due to convenience or the desire to accrue loyalty points, credit cards are a preferred method of payment with your clients, even for insurance premiums. Payment by credit card significantly reduces receivables and can help you close business faster. Depending on your merchant agreement, some providers allow you to charge an administrative fee to offset some of the costs. Credit cards can also be a very practical option for clients who need to clear up an NSF, overdue payments or process a policy change.

Premium Financing

Offering premium financing benefits your clients in the way of more manageable monthly payments and a positive impact on their own cash flow. At the same time, premium financing eliminates the receivable and the risk from your brokerage, as the premium is paid in full from the lender. Offering premium financing can also compound the impact on your bottom line. It saves in operational administration, expedites payments and can even earn you income. 

With credit cards and premium financing you earn any commission up front and don’t have to wait for earned premiums, giving your cash flow another healthy boost. With poorly managed receivables as one of the main reasons why Canadian businesses fail, providing payment options to all your clients is a wise strategy.

Change Your Culture

Improving cash flow isn’t something exclusively for the ceo or your finance team to focus on. When approached holistically, the entire organization can make contributions to effective cash management. Companies must create a cash management culture. This means going beyond driving new business or expense management. It means offering payment solutions to every client, not just those who seem reluctant to pay premiums in a lump sum. Consider providing training and education to staff on how offering payment options is beneficial to clients and your organization. Even clients who can pay in full might not understand the value of putting that capital to work in their own business rather than paying insurance premiums. Providing this insight enhances your value proposition and your cash flow. 

Even the most profitable businesses can fail due to poor management of their cash. Implementing payment solutions helps companies navigate through the ebb and flow of market cycles and enjoy the smooth sailing of unwavering cash flow. 

Smooth sailing for your brokerage can be achieved by maximizing cash flow through methods including accepting credit cards, improving receivables and offering premium financing.