Improving accounts receivable collections is something necessary for many different companies all around the world. Unfortunately, this is an area of business that is not properly covered. Those that normally handle collections inside a company do not have experience or the needed knowledge to properly handle problems. Hiring companies like Receivables Performance Management Reviews is definitely a good idea exactly because of the experience factor added. However, even if you do not hire a firm, there are things you can do in order to improve accounts receivable collections, including what is listed below.
Create A/R Aging Reports
According to Receivables Performance Management, the very first step that needs to be taken is to determine payment status for all receivables. Companies do this through the A/R (aging report). This tracks and measures payment statuses of all customers. The accounts are broken out by how many days passed between invoice issue and due amounts. Potential collection problems can thus be discovered early before they are past due for a long time. Collection efforts can also be efficiently focused.
Always Be Proactive
Various different things can be done as the invoice is submitted, with the purpose of making it much easier for clients to actually make the payment. For instance, in the event the invoice is not complete or clear, the missing information can easily lead to lack of payment. By eliminating such an error you increase payment speed.
Always learn all that you can about the payment procedures the clients use. These have to be carefully covered and then changes should be made. If a payment is due, a person inside the accounting department should contact the accounting department of the client. The purpose is to be sure that all that is needed for payment to be made is actually present. This is particularly important with big invoices.
Early Payment Discounts
You should seriously consider setting up some sort of early payment discount system. Everyone likes to save money! This is very important because discounts make customers pay invoices faster. While this is only possible for some businesses, whenever it is an actionable possibility, it has to be considered. Alternatively, such an offer can be offered only when there is a cash flow boost. You contact customers and offer the discount if payment is made within a specific time frame. As this happens the business receives a cash influx that can be highly beneficial in various situations.
Developing Payment Plans For Past-Due Clients
In the event the client informs you there is a cash flow problem on their end, you can adapt and work with the client as opposed to aggressively pushing for a payment to be made. The payment plan can be very beneficial for both parties. You receive at least a part of the cash instead of nothing at all. The client also gets to better deal with cash flow problems and can show loyalty to the decision in the future. The only extra thing that should be mentioned is that this has to be put down in writing with both parties signing the new agreement. Future sales need to be properly managed and controlled.
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