Business Flow: Collect Your Accounts Receivable

If your business seems to be thriving, but your cash flow is in a crunch, you may want to look at your accounts receivable and how your collections are handled. There are ways to change that by reviewing and modifying the way you resolve outstanding invoices.

1. Early Invoicing

Many businesses wait to send out invoices at the end of the month or cycle, depending on the type of business it is. However, if you send out requests for payment immediately after a product is fulfilled or service is provided, you will get them to your customers sooner. 

2. Don’t Be Afraid to Collect

Never feel bad about asking for what is owed to you. If you are clear about the payment terms, and send reminders with a grace period, there is no reason you can’t follow up. Keep a regular schedule of emailing clients with outstanding balances and try not to waiver on your payment policies except for extenuating circumstances.

3. Use Milestone Invoicing

If your company is in construction or a long-term project which covers an extended period of time, you may want to consider billing in a payment plan or milestone form. Once you reach that agreed-upon milestone, a portion of the payment will be due.

4. Be Smart About Extending Credit

When it comes to credit line and deposits for goods and services, be very careful and very clear about your terms. When a customer falls behind on the payments or other terms, don’t be resistant in reducing credit limits or applying late fees.

5. Clear Itemization

Customer service issues arise, more specifically when it comes to billing. If the client does not understand what they are paying for, they are more resistant to fulfill their debt. To minimize the amount of push back, make sure that your invoices are clearly itemized with detailed descriptions of the service or product purchased.

6. Offer Flexible Payment Options

Accept as many payment options as possible to make it easy for customers to fulfill their financial obligation. Whether it’s credit cards, ACH, payment schedules, paper checks in the mail, you increase your likelihood of repayment even if it’s not the most convenient.

7. Accounts Receivable Aging Report

Running a report of all of your clients and their current state of financial responsibility will certainly help organize the flow of repayment and default resolution requests. The information on your report may even help you identify common issues with a particular client so that you can optimize your collections process.