A story by Kathy Hoffelder titled “Why Firms Don’t Pay Their Invoices” appeared July, 30 2013 on CFO.com. According to the story, one company, TermSync, conducted a study of 100 financial executives.This research points out some major opportunities to improve accounts receivable collections that are completely within our control. Below are a five very simple accounts receivable best practices that you can implement today to improve your accounts receivable management and get paid faster.
1. Make sure the invoice includes the correct customer purchase order number, and make sure that the customer receives the invoice. These two actions alone could potentially eliminate 60% of your late payments combined.
2. The goal to getting paid on time is to get the right information to the right person in the right format, and in time for them to make a payment as easily as possible. By preventing internal issues such as missing purchase orders or not sending invoices to customers, and by offering flexible payment methods to customers, you will certainly reduce invoice disputes and will get paid a lot faster than you ever imagined possible.
3. Analyze customer returns and seek ways to reduce returns as these add significant costs to your bottom line and barriers to retaining customers and growing sales.
4. Understand that it’s not your fault that a customer is experiencing cash flow problems. If you provide a quality product or service and graciously extend credit terms – it’s their responsibility to pay you on time. Sometimes you need to be flexible with your customers that are experiencing short-term cash flow problems, but in other cases you need to remain firm and continue to pursue every option you have to get paid. After all, there is a cost of cash, and every day that goes by it becomes less likely that you’ll ever see your money; which affects your own cash flow and profitability.
5. The financial supply chain is an interwoven system. The health of your customers will inevitably impact your financial health, so be proactive and work with your customers so you can succeed and grow together.
For more accounts receivable best practices, download our free white paper “17 things you should be doing right now to reduce outstanding A/R.”