I have a colleague who used to work as a supplier for a big corporation. The projects looked great on paper as they were always large and well-paid. But, at the very best, the invoices were paid in 90 days (often not having been accepted until the entire project was complete), and they frequently ended up being passed between departments, requiring any number of signatures, so the waiting period was extended still further.
When we onboard new clients, even if we do our due diligence and establish their creditworthiness before we start doing business with them, there can still be doubt when we send out those first invoices. And it isn’t just new clients, either: established clients can sometimes run into their cashflow problems and fail to pay by the due date.
The monies you owe on unpaid invoices – your accounts receivable – is an aspect of business you need to keep firm control of. If the time between an invoice being raised and the money arriving in the bank isn’t carefully monitored, it can put an unnecessary strain on cashflow, which we’ve seen is the key to business success.
Here are five simple ways to keep on top of your accounts receivable:
- Review your Terms of Trade: agreeing upfront when you will get paid reduces risk. Remember that your client may operate different Terms of Trade, so it’s essential to be clear whose Terms apply. It’s also a good idea to include the option to charge late-payment fees, just in case there’s a delay. Remember: if it’s not in the contract, it won’t be easy to introduce these later on.
- Set up an automated online billing system for interim and final invoicing. Particularly if your billing is staged, this will simplify things and ensure no time is lost.
- Encourage customers to pay on time by offering discounts for prompt payment. We know that good cashflow is the key to success, so it may be worth accepting a slight reduction in money if the cash arrives in your bank sooner rather than later.
- Make it easy for your clients to pay by offering alternative methods such as online invoicing, credit card, direct debit, etc. There’s nothing worse than realising that a payment has been delayed because of an incompatibility between your systems and the systems your clients prefer to use.
- Implement an add-on service, such as Debtor Daddy, Satago, Chaser, etc., to chase monies owing to you. Not only will this remove the need for manual intervention, freeing up your staff to work on more productive tasks, but it will also give you access to reports showing where the problems are arising and deeper insight into how to take control.
Having a clear, automated process for credit control will help keep things running smoothly.
But if it does come down to chasing payment, don’t forget to ensure that your team members are fully trained, that they understand their role, are empathetic and stick to the same script.
Your accounts receivable process is just one aspect we look at when working with our clients. Why not arrange a chat with us to see how we can help you take control of your business finances?