Successfully managing your company’s collection activities is not easy task and even more difficult if you are using spreadsheets, post-it notes, or manually compiled customer lists.
In this post, we share best practices businesses need to manage account receivables as efficiently as possible to prevent cash-flow crises.
In order to better understand how a accounts receivable module can help, it is beneficial to first review some recommended receivable collection tips.
- Efficiently Collect Receivables and Keep an Accurate Accounts Receivable Balance
- Issue your invoices on time. Instead of issuing all invoices every two weeks, schedule invoices so they are sent shortly after transactions.
- Use several channels to deliver your invoices. Some companies prefer electronic invoices; others still use traditional mail or fax. We suggest you use at least two channels to make sure your invoices reach customers quickly and on schedule.
- Support each invoice with related documents. Send any documents that support your invoice along with the invoice to shorten the payment processing cycle.
- Empower your invoicing staff to also collect the payment.The employee dealing with the client on a regular basis is more likely to know who authorizes payments and be able to clarify any misunderstandings. (Note: It’s important to keep a separation of duties and maintain oversight to prevent fraud.
- Set up a simple process to shorten approval times. If you have an internal invoice review process, hold the reviewing manager accountable to a specific timeframe and create a process his/her director to immediately approve invoices to ensure timely invoicing and approvals.
- Implement several payment methods. Instead of forcing customers to embrace your preferred payment method, implement several systems and let them choose what works best for them.
- Offer early payment discounts. Many customers will settle for even a one percent discount, which could save you the trouble of tracking invoices and making collection calls. It could also motivate your clients to expedite their payments.
- Keep a close relationship with your customers’ account payables teams. You should build a cordial relationship with your customers’ accounts payable teams.
- Send follow-up notes on due and completed payments. If a customer fails to make a payment, sending a polite reminder note might help speed things up. Sometimes invoices are simply lost. Adding a thank you for your payment on their next invoice is a nice touch and gives you the opportunity to show your appreciation for their business.
Some of these tips might seem difficult to implement or even impossible if you do your accounting manually. Cougar Mountain Software’s flagship accounting solution, Denali automates some of these routine tasks while delivering robust accounts receivables features.
Some of the best accounts receivable software should let you generate and track invoices and supporting documents, generate reports, statements, and late payment notices, set up customer profiles and alerts for late payments, calculate and apply early payment discounts and late payment penalties, and much more. The result is better collections and more accurate accounts receivable balances.
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