5 Tricks to Manage Accounts Receivable
Just because your business has customers does not necessarily mean that your business is successful. To be a long lasting company, you need a consistent cash flow. The only way this is going to happen is if your customers pay for your service. In many markets, services are provided before payment is collected. That service is a gift until the bill is paid. Managing your accounts receivable collections should be a top priority in your company. Here are five tricks to improve your methods of collecting payment from customers.
It is important to actively pursue payment. Do not send out the invoice and then just wait for the money to come in, because unfortunately that will not always happen. If payment has not been received and it is a few days prior to the due date, send a gentle reminder that the payment date is coming up and ask if there are any questions about the invoice. It is also a good idea to make sure that the invoices you are sending out are clear. Include all necessary information that your client might need to make the payment.
Stay organized in tracking your accounts receivable by using some sort of report system. In the report, it is best to organize the invoices by the date sent. This makes it easy to quickly spot invoices that are nearing the due date or are past due before it gets out of hand.
To encourage prompt payment, you might want to consider some incentives. One such incentive could be a small discount for paying within a certain time frame. While this decreases the amount of money you earn, you could benefit from the boost in cash flow.
You should be firm in stating the expectations you have of when payment is due. The first day a payment is late, take action and send out notices immediately. Often, payment will get sent with a first notice. However, if payment is still not made on the accounts receivable, a letter indicating potential legal action should be sent.
It is important to be firm with your expectations, but it is also important to be considerate of your customers. If a customer approaches you and explains that they are having cash flow problems as well, it might be in your best interest to negotiate a payment plan instead of waiting an extended period for that customer to have sufficient funds to pay the invoice.
Managing accounts receivable is one of the most important tasks you have as a business owner. Make it easier on yourself by following these tricks and tips.