Accounts Receivable: Getting Things Under Control
Nothing can bring your business to a standstill faster than a problem with your accounts receivable. You can have extremely strong sales but still watch your business struggle if you’re not getting paid on time. As your business grows, there are a few simple things you can do to make sure you get this department under control and receive the money you’re entitled to.
Make Fast Payments Possible
Streamline your accounts receivable with features in your business software to get invoices out quickly and help customers to pay quickly as well. There’s no reason to wait days for the post office to deliver your invoices when you can send them instantly via email. Provide multiple payment options to increase your customers’ convenience. Accept payments via online payment services, credit cards, electronic funds transfer or checks, and your customers will often pay faster.
Set Payment Terms According to Your Customer’s History
While new customers are always a good thing, they also bring an element of risk. If a project requires a substantial investment on your part, it’s wise to check your customer’s credit before you agree on payment terms. A client with poor credit can still be accepted, but structure payments to protect your investment in the work. Apply the same standard to existing clients with a history of slow payments. Consider declining work from a customer who brings more potential for risk than reward.
Once the price is set and payments detailed, be sure to create a written contract. This documents the payment agreement and outlines your collection methods. As your work progresses with the client, the contract makes sure you both understand what’s expected.
Build Bridges, Not Walls
Many accounts receivable challenges can be avoided by maintaining open communication with your customers. Keep in touch while work is in progress, and follow up when completed to make sure your customer is completely satisfied. Resolve any issues right away, and let your customer know to watch for their invoice via email.
Late payments can be frustrating, but you will always have better long-term success with your collections by maintaining a friendly and professional relationship with your clients. Send a follow-up invoice and call customers again after 30 days to check on the payment status. For larger clients, developing a relationship with an accounts payable manager can prove a great asset to streamline payments.
When to Use a Collection Agency
Referring an account to a collection agency should be done only after you’ve exhausted all other options. Collections are expensive, so you’ll only see about half of any money collected from these accounts receivable. If the account ages past 90 or 120 days, be sure to attempt one last contact with your customer prior to taking this step.
Use these steps to proactively obtain the money you’re owed. Doing so can mean the difference between running a successful business and shutting your company doors. For more information on accounts receivables financing contact Growth Lending Group.