Making a sale is great. Collecting payment for that sale is even better. If you have been in accounts receivable management for more than a few months, you understand the truth of that statement more than most.
Are your receivables in a sorry state? Read on for tips to improve your cash flows.
The reality is, as much as your company may celebrate the thrill of sales victory, the real battle often starts long after the sale is done. Sadly, your cash flow, the very lifeblood of your business, can be severely interrupted by poor accounts receivable management.
Does that mean that your business should operate on a strict cash basis? Not at all. How about beating up past due clients until you're paid? Nope, that isn't legal, no matter how tempting it may be.
What it does mean, however, is that you have to stay on top of your receivables. Here, then, are some ways to whip your past due clients back into shape without sending cousin Guido out to collect.
1) Make invoices easy to read and understand.
While your company's invoice is perfectly understandable to you, you might be surprised at how confused customers can be. For instance, Business.com gives this advice: "Replace ambiguous terms like "net ten" or "due on receipt" with specific due dates, and the exact amount the customer will owe if payment isn't received by that date."
2) Offer a variety of payment options.
It could be that your customers are having financial hiccups of their own. By offering a variety of payment options, you make it easier for your customers to handle their own cash flow while still paying your company what they owe.
Even if your customer is not having difficulties, offering a variety of payment options makes it easier to pay you. Anything that makes that easier is a good thing, for both you and your customer.
3) Get organized.
In all honesty, sometimes the reason your customers are not paying your company on time has a lot more to do with your workflows and receivables process than with the customer. Before extending credit to customers, you need a defined way of making credit limit decisions.
FundingGate gives this tip:
"Start by setting up a professional credit application that gives you a chance to get as much information as you can on these customers. Use this info to vet them so you are making proper credit decisions ... Once you've decided to move forward on credit with a customer, be sure you have a contract that clearly states the terms you are operating on and that that customer knows they must pay you."
If a customer's account becomes delinquent, communicate immediately to minimize any cash flow consequences. Sometimes it is a good practice to contact the customer even before an account becomes delinquent. This brings us to our last tip ...
4) Get automated.
Accounts receivable software can help you keep track of past due accounts and keep the lines of communication with your customers open. For instance, Collect-IT A/R software integrates seamlessly with your existing ERP system and utilizes a centralized dashboard so that you can see the status of your receivable accounts at a glance.
Automating your receivables workflows can solve a variety of collections issues.
Better yet, you can customize and automate communication with customers. Need to send a reminder email? That can be automated easily. Want an updated task calendar for your collections staff? Not a problem. Want a long, tall drink after work? For that, you're on your own. But for the other things mentioned, Collect-IT works like a charm.
By automating your accounts receivable process via A/R software, you can maximize the number of accounts that maintain a current status and minimize the time you spend on collection activities. That is a win-win.
The Bottom Line
Clear communication with your customers is the basis of great accounts receivable management. Making your invoice easy to understand and providing a variety of payment methods will help you head off bad debts before they happen. Organizing and automating your receivables workflows keeps customers from falling through the proverbial cracks and ensures that your A/R stays in top shape and the cash keeps rolling in. Want to know more about accounts receivable and credit collections management software? Contact us today for the latest news on A/R solutions.