Numerous things go into the running of a successful company. While sales and lead generation are important, there’s one component that’s frequently overlooked by business owners: accounts receivable collection. Small businesses often come up short when working with large corporations with longer payment terms. Here, readers will pick up several tips on improving accounts receivable collections.
Proactively Manage Collections and Invoicing Efforts
There are a few things business owners can do to make invoice payments simple. For instance, be sure those invoices are complete and clear so clients don’t send them back for review. Learn the nuances of clients’ payment procedures and follow the rules, especially with big invoices.
Move Quickly on Past-Due Accounts
Studies show that the longer a receivable goes uncollected, the less likely it is to be collected at all. Therefore, it’s important to contact clients about past-due payments as soon as possible. The accounting department should email or call the first day a payment is late, and if it’s not forthcoming within a reasonable time frame, more vigorous reminders may be needed.
Consider Offering a Payment Plan
Past-due clients may say they’re having their own cash flow difficulties and ask for some help. In such a case, consider offering a payment plan for the past-due amount. Be sure to put the terms in writing and have both sides sign it. Furthermore, make subsequent sales COD (cash on delivery) until the past-due payments are made up.
Talk to the Experts About Helpful Cash Management Tools
Many banks offer a variety of cash management assistance that will help small businesses improve their collection practices and more effectively manage their cash flow cycles. For instance, a wholesale lockbox is a setup where customers mail their checks to a post office box that’s monitored by the lending institution, which gathers them for immediate deposit. Another option is electronic payments submitted via ACH or Automated Clearing House, which reduces the likelihood that a client will offer the “check is in the mail” excuse.
Cash flow management is difficult, especially for small businesses. However, these tips may help. For more cash management and collections tips, visit Cane Bay Partners online.