A disorganized accounts receivable management strategy can be an obstacle to business growth. Nearly one-third of businesses find themselves in the sticky situation of being unable to pay suppliers, make loan payments or pay their employees due to a lack of accounts receivable management.
It is important to establish an accounts receivable management strategy in order to have a successful business. It is certainly worth investing time and effort to optimize accounts receivable processes as it will directly impact marketing operations, sales, customer service, and overall business functions in a positive way.
One of the benefits of learning how to manage accounts receivable is that it will prevent capital from being wasted and therefore help increase liquidity.
In this article, you will find 5 tips on how to optimize your company’s accounts receivable process.
- Prioritize Overdue Receivables
There are studies that state that the longer you let accounts receivable go uncollected, the less likely it is that they will be collected in full or in part.
It is a good idea to be aware of all overdue accounts receivable so you can act quickly before more time passes and they become uncollectible.
Your company’s administrator will be in charge of talking to the customer from day one of the overdue payment. In the event that the company has a late payment policy, the administrator should be polite in communicating with the customer to inform them of any penalties they may face for late payments in the future.
It is important to remember that while dealing with the customer should always be cordial, communication should be firm when payment is not made within the agreed time. Having open and direct communication with customers also helps you build stronger relationships with them and understand each customer’s situation so that you can make appropriate decisions to avoid late payments in the future.
- Payment Incentives
A very effective way to manage accounts receivable is to implement a discount to customers for early payment. Many companies often offer a discount to incentivize customers to pay early.
The discount will depend on the industry of each business. It should be an incentive that works for both the customers and the business.
It is advisable to consult with industry professionals to review the feasibility of this option.
- Offer Different Payment Methods
There are different payment methods that you can accept in your business in order to streamline the process with customers. Also, the more options you have to offer them, the easier it will be for them to make the payment. Bank transfer, credit card, check, PayPal, etc., whichever you choose, will determine the speed at which you receive payment.
Generally, everyone has their own preferred payment method and it will be much easier to receive payment from a customer if you have it. Accepting different payment methods highlights your company as a flexible company and this will make you able to receive payments from customers much faster.
- Offer Payment Plans
When you have a customer who notifies you that they have been unable to make their payment due to lack of cash flow and requests an extension, as a business you need to be understanding and supportive of your customer.
Without having to forgo payment, a good option is to give your customer a payment plan, especially if they are a long-term customer. Offering flexibility through a payment plan will strengthen customer loyalty.
Remember that it is important to establish in writing the terms of the payment plan and be signed by the parties involved. You should also make all future sales COD (cash on delivery) until the past due amount is paid in full.
- Invoicing Automation
An efficient invoicing process can streamline the accounts receivable process. It is a fact that the longer you take to invoice a customer the longer it will take for them to pay you. Errors in figures or units of measure can hinder the process. As a business, you must keep in mind that invoices must be sent in a timely, consistent and defined manner.
To avoid errors and delays in sending invoices, it is advisable to resort to invoice automation. Lean on technology and specialized accounting software to increase the efficiency of issuing and sending invoices.
In addition, billing automation allows you to create scheduled payment reminders to notify your customers of unpaid invoices via email.
One of the greatest benefits of using these solutions is that most of them are configurable to create efficiencies according to your company’s needs, when you need them. There’s no need for off-the-shelf solutions that don’t fit your company, when so many solutions can be tailor-made to your particular situation.