Managing Accounts Receivable: 6 Tricks You Can Use
If you’ve been in business for a while, you know that the money your clients and customers pay isn’t always cash you can use. Often, you need to wait for them to process their own internal payments. Other times you might need to remind them several times before you finally get the payment you’re owed. Regardless of the reasons, invoices have the potential to sit in your files for months before they’re paid, making the job of managing accounts receivable difficult.
However, there are tricks that you can use to increase cash flow and work around the times you’re waiting for payments to come in. You don’t need to let delayed receivables stunt the growth of your business if you employ these simple strategies.
Make an Aging Report
An accounts receivable aging report shows you how long all your invoices have been sitting around. Organize accounts by the age of the invoice and the amount paid. It’s important to have an overhead view of all of your accounts in order to be able to identify collection problems and focus resources appropriately.
Make It Easy to Pay
Sometimes it helps to make things as simple as possible for your clients and customers. The first thing you should do is to make sure your receipts and invoices are complete. This will make it easier on the client organization’s accounting staff. Nobody wants to fill in the blanks in order to pay an outstanding account, for both practical and legal reasons. It never hurts to reach out and ask your client if they have all the necessary information to make a payment if it’s getting close to their due date.
Pursue Overdue Receivables
Sometimes a missed payment is an honest mistake. It’s important to let your clients know as soon as they are past due on any accounts receivable. Start out politely, under the assumption that they’ve simply forgotten about or misplaced the invoice.
Discount Early Payments
Offering a discount on an early payment is very similar to paying a fee to a financing organization for factoring an invoice. Figure out how much and improved cash flow is worth to you, and offer a discount that represents that value.
Offer Payment Plans
Clients with past due accounts receivable might be able to give you their overdue amount in installments. Approach them with a plan under the assumption that they want to settle their debt.
Ask Your Bank
Financial organizations help many businesses during cash flow crunches. Things like deposit boxes and electronic payments do wonders for accounting issues.
Check with your bank if you’re unsure how to proceed. They’re often able to provide accounting advice on any of the above topics above, along with helpful cash flow products.