It's not uncommon for organizations to struggle with their accounts receivable management. Although the account helps you realize your revenue, it's hard to fully grasp its many concepts. The bottom line is that improper accounts receivable management will lead to less income. In fact, according to 43% of small businesses have customers who are more than 90 days past due on payments and that will lead to serious losses in their income. According to a study conducted by Atradisu Payment Practices Barometer found that that businesses lose as much as 53 percent of the value of their receivables if they are not paid within 90 days of their due date. It's important that you understand how vital it is for your company to stay on top of its accounts receivable, here are 7 ways to improve your accounts receivable management.
1. BE PROACTIVE
When submitting invoices, there are a few different things you can do to make it easier for your clients to pay you sooner. First, make certain that all of the invoices you are going to send out are clear and complete. Missing information will lead cause your client's accounting department to kick it out of their system for review. Second, understand and study the nuances of each of your client's invoice payment procedures. Once you understand those you can follow them more carefully. Third, a week before payment is due, make sure that you reach out to that client's accounting department and confirm that they have everything they need to make payment.
2. MAINTAIN POSITIVE RELATIONSHIPS
We live in a world where business is conducted on a relationship basis and taking care of those relationships should be important to you. A satisfied customer will likely lead to a long-term customer, which is a valuable asset to your organization. To get more satisfied customers, brainstorm some implementation methods that could improve your overall customer experience. Higher customer experience means that there is a higher chance that your customers will become brand advocates, thus making you more money.
3. OFFER MORE PAYMENT OPTIONS
There are so many different payment options out there and some of them are probably used by your customers. By giving a customer more ways to satisfy their debt, you increase the chance that he will pay you sooner. Instead of limiting your payment options to cash or check, consider some of the newer ways to pay including PayPayl, credit card, or electronic transfer funds (ETF). Setting up these newer payment options is not a painstaking process and you can register a new account almost immediately to start accepting online payments.
4. REVISE CUSTOMER PAYMENT TERMS
Businesses that deliver invoices via paper mail most likely offer terms that grant customers extra days before their bill is overdue. These terms are implemented to compensate for the time required for the invoice to reach the customer and for the customer's payment to reach the business. However, these terms allow customers to take 30 days or more to pay an invoice which increases the time a receivable remains outstanding.
If you rely on email or other electronic means to deliver invoices, the invoice reaches the customer instantaneously. These methods allow you to change your payment terms from "net 30 billing" to "payment is due upon receipt." This way you can collect your receivables much faster.
5. IMPLEMENT CONSERVATIVE CREDIT TERMS
Extending a large amount of credit to your customers can negatively affect your accounts receivable outstanding and cash flow. Before you consider extending credit to a customer, check that customer's credit history to confirm that he or she pays bills on time.
6. CONSIDER OFFERING INCENTIVES
Incentives are a great way to motivate stubborn clients to pay their debts sooner. One of the best incentives that you could offer is and early payer discount. If you offer a 2/10, net 30 discount customers will receive a 2% discount if they pay within 10 days. Obviously, there is a cost to your business for offering a discount but the cash flow boost you gain makes it worthwhile.
7. AUTOMATE YOUR ACCOUNTS RECEIVABLE MANAGEMENT
Instead of outsourcing your accounts receivable and putting your second biggest account in the hands of a different organization, consider automating your accounts receivable management process. There are many different solutions that can help you achieve this but A/R Insite™ offers the ability to automate your accounts receivable management from anywhere and at anytime through the cloud.