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INDUSTRY INSIGHT
Tips to Handling Receivables the RIGHT Way
Cash flow is the lifeline of any business. Trying to run a business/practice without sufficient cash flow is like trying to drive a boat without water – you are stuck with no way to move.
Did you know?
A 2006 VISA survey found receiving and collecting payments is the cash management issue small business owners find most challenging.
So how do you effectively manage your business’s accounts receivables once you’ve completed the work and await payment? Here are five tips to help keep your business afloat.
- Collect Money Quickly
Your company needs an open cash flow to both survive and flourish. Not holding enough importance on cash flow will ultimately set the business up for a cash shortage leaving you running in circles looking for alternate sources until you are paid and caught up. Get in the habit of checking your account daily and invoicing clients promptly so you know where every penny of your company’s money is and where it’s going.
- Understand How Your Client’s Accounts Payables Works - (for B-to-B only)
If you know all of your client’s invoices need a specific signature, then you know you want your invoice to reach that person’s hands as quickly as possible. If you notice certain balance totals require different processes, you can assume the higher your bill is, the faster you want that invoice out the door to go through the different channels. You also know there are a number of eyes keeping track of finances. Understanding what processes your clients’ accounts payables go through provides you with a better understanding of how to work with them.
It’s also always good to befriend someone in your clients’ accounts payable departments. That way, if there ever is a problem, you have a “friend” to turn to for answers - not just a stranger on the other end of the phone.
- Make Invoicing a Priority
Invoice as soon as the job is complete. The longer you wait, the longer you put your company at risk of serious cash-flow deficiencies. Develop a schedule of invoicing for first time, as well as, follow-up invoicing. Very rarely will a company cut a check before receiving an invoice, and that’s why it’s so important to get those out as soon as possible.
- Follow-Up on Invoices
As soon as an invoice is past due, make a follow-up phone call to the client. That means a bill due on day 30 that that remains unpaid on day 31 should be followed-up on. Following-up on a regular basis prevents long, drawn-out processes and is better for maintaining relationships before situations get out of hand.
- If Necessary, Develop a Payment Plan
Unfortunately, some businesses will encounter a situation where the client is financially unable to pay. In this case, keep the conversation polite and work out a payment plan – automatically bringing lawyers into the picture will further complicate the situation and possibly injure the relationship. Accepting the payment in portions rather than in full is not ideal but at least you keep the upper hand.
Effectively managing your accounts receivables provides your clients with your expectations, your employees’ confidence in the company, and yourself a piece of mind knowing where your company’s money is at all times.