When a business provides a product or service, it has a right to expect to be paid on a timely basis. However, anyone who has been in business for more than a few months has learned that prompt payment is not always the case. Often, accounts become seriously past due, or when payments are made, there are sometimes insufficient funds in the customer account to cover a check. Accounts not paid within terms can have a serious impact on the cash flow of the business, It is becoming increasingly important to be mindful of these trends as accounts payable departments everywhere are putting the brakes on 'Prompt Payments'.
Accounting managers and their staff often learn that managing the accounts receivable is tricky and involves the delicate matter of asking for payment without coming across as harsh. There are processes that, once implemented and the employees are trained on, can be effective in obtaining payments. The balance a customer owes is often a moving target. Continual monitoring is required from day to clay as the status of these accounts change with new orders, the posting of payments from prior invoices, patient partial and requests for back-up documentation.
Although many businesses have some knowledge of best practices in accounts receivables, here are some ideas that will be helpful in managing your accounts receivable and cash flow. Please review the top ten ways to improve collections below:
Nave a defined credit and collection policy
One of the major causes of overdue receivables is that your business has not clearly defined to its customers in writing when payment is due. If customers are not clear on the payment terms, they may feel that 60-day payments are line, especially if there are no penalties for paying late. Make sure that your payment terms are clearly staled in willing on the work order, agreement or invoice. If payments are late, have a defined procedure for the accounting department to follow as to when to make a call (day 40) and when to send a reminder notice (day 45). Instead of sending a 60-day statement, try sending a 'serious reminder' letter at day 60 and another call attempt, too. More and more companies like ours are now offering clients 'first party' contacts made in the client's name to help in this area.
Send out statements promptly and consistently
If you don't have a systematic billing system, get one! Many times, the customer has not paid simply because they have not received an invoice or...