There is a Better Way to Manage your Receivables

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When it comes to collecting accounts receivable (AR), time is of the essence and should be received promptly. If you are negligent, this could lead to a myriad of financial problems for your company, which could include poor cash flow and the inability to pay its bills.

Here are five useful ideas to improve collections:

1. Build an AR aging report. This report will give you an overview at a glance of all your customers’ current payment status and the amount of money they owe. These reports usually monitor a customer’s payment status in time increments; 0–30 days, 31–60 days, 61–90 days, and 91+ days past due.With this knowledge, you can pinpoint where to direct your efforts. For example, you can focus on collecting the most sizable receivables that are also the furthest past due. Alternatively, you can concentrate on collecting outstanding receivables before they fall more behind.
2. Appoint a sole accounting employee to manage collections. Allocating the responsibility of AR collections to one employee will ensure that the “collection buck” will end with someone. Otherwise, it’s entirely possible for the task of collections may fall by the wayside as accounting employees will prioritize more urgent tasks.
3. Review your invoices. Customers will always prefer bills that are concise, accurate, and easy to follow. If your invoices are careless and unintelligible, this could create a set back in the payment process as customers contact you to clarify their bills. This lack of care is essentially an invitation for your customers to be untimely when paying your invoices.
4. Offer a variety of payment methods.  The more payment methods customers have, the more accessible it is for them to pay your invoices promptly. These options could include payment by check, Automated Clearing House, credit or debit card, PayPal, or even text message.
5. When it comes to billing and collections, be proactive. Your customers may have distinct procedures that vendors must comply with when it comes to the format and submission of invoices. Please familiarize yourself with these procedures and make sure to follow them to avoid delays in payment carefully. Also, you may want to consider contacting customers to ensure everything is on track a few days before payment is due (especially for large amounts).

Careless working practices can prove to be a costly mistake. 

We can assist you in implementing these and other strategies to improve collections which could boost your revenue and cash flow. We can also advise you in those sensitive situations where it’s become clear that a past-due customer won’t (or can’t) pay an invoice. If you have any questions regarding any of these strategies, please contact us at 949-860-9887.

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