In order to achieve financial success, a company must collect from customers, vendors, clients, and others involved in doing business. When looking at your company’s accounts receivable processes, you can follow a few simple steps to improve the system and collect money faster and more efficiently. If you aren’t actively involved in the receivables management of your company, you may find that it drastically impacts your success.
Good Communication
The first step in improving the accounts receivable system is to make sure your communication is effective and timely. If you bill customers or clients, ensure that invoices go out regularly and that you have a system in place to verify correct addresses. All forms of communication should include terms and expectations for payment, which helps prevent confusion about when payment is due. You should also have staff assigned to follow up on past due accounts. Monitor calls regularly to maintain professionalism when dealing with all clients, so that you won’t alienate or upset those with whom you do business.
Tracking System
If you send out invoices but don’t use a system to track payments, your accounts receivable department will soon become very muddled. You can easily use online tools to track results with metrics, such as the age of accounts, best possible DSO vs. actual DSO, risk profiles, monitor credit and risk for larger clients, and more. This also allows you to track total assets and the percentage of outstanding accounts measured against the total. Use the metrics to determine activity levels, which can help your staff find the most efficient way to follow up on accounts that are overdue.
Incentives
When you offer incentives to your staff members who work on receivables management, it can help improve the return rate on past due accounts. You may consider providing bonuses to those who achieve targets and goals on actual collections, or incentivize the whole team when they reach a goal for a specific quarter. Some companies offer bonuses that are a percentage of actual collections to increase the motivation to collect on larger accounts or higher volumes of accounts.
Collect Upfront
In some companies, collecting a portion of the required payment at the time of service helps to improve the accounts receivable process, since it reduces the amount that must be collected after the fact. This is especially helpful in healthcare or other services. A patient having surgery may not want to pay the bill after the service has been performed, but will typically be more willing to pay prior to the service since he or she will not want to risk cancellation. When you can collect more upfront, this will help the bottom line.
Keep Information on File
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If you set up a payment plan or do business regularly with a client, develop a system that allows you to safely keep credit card information on file. This makes it much easier and more efficient to bill the client for a service without spending time or money to contact them and obtain payment information. Check out Sage mobile credit card processing tools to learn more about how to keep this data secure, so your clients will feel comfortable providing this information to keep on file and allow you to charge for future bills.
Use Tools and Resources
There are many software options that will help you manage your company’s accounts receivable. If you don’t like the one you currently use, check out others and find one that works. Many systems integrate for tracking, invoicing, and payment processing, allowing you to access all the information in one place. You should always know where you stand in terms of outstanding accounts versus assets, so that you can prevent going into the negative when paying your own vendors or completing payroll.
With so many options at your fingertips, improving your receivables management process is easier than ever. Your business can improve and thrive if you are consistently collecting on invoices and continuing to produce the products or services that your customers need.