One of the most significant problems companies face is not getting the word out about their product or making a sale, it’s actully getting paid for the work that they do or the services they provide; and this causes serious problems. When customers do not pay within the agreed upon credit terms cash forecasts are thrown off, cash flow is slowed, and it becomes tough for a company to meet their financial obligations. When customers continue to neglect payment, the cost of carrying bad debt, write-offs, and legal action can even further exacerbate the situation. By changing the way you think about accounts receivable and putting into practice some business debt collections best practices, you can quickly and easily put an end to this cycle in your organization.
In many organizations, business debt collections are usually considered a by-product of doing business and the efforts to collect invoices are usually unfocused. It is this thought process that needs to change if you want to collect unpaid invoices faster and put the money you’ve earned to work to grow your business.
Rather than focus on how they can collect what is owed them faster to increase cash flow, some companies who see receviables as a by-product of doing business, focus instead on making more sales. More sales then turn into more invoices, and if you do not have solid business debt collections procedures in place, those invoices may very well end up like the others; unpaid. So the real focus of companies should be improving their accounts receivable management processes to support the sales they make.
There are a number of things that can be done to improve cash flow through better business debt collections. Some of these techniques include:
- Recognize credit risks before extending credit by requiring each customer to fill out a credit application.
- Invoice quickly and re-bill monthly to make sure your invoices do not get lost among the others.
- Alert customers to past due invoices promptly.
- Send regular communications to customers during the collections process to give them plenty of opportunity to approach you with an issue or ask questions about their invoice. Be sure to keep detailed notes about the phone call and save all email and written correspondence with the customer as this may be useful later in the collections process.
- Identify customers who may be struggling financially and work with them to figure out how you can still get paid. Track their past payment habits and if you see a customer who generally pays on time begin to get later and later on payments, reach out to see what you can do to help. Don’t forget that accounts receivable is about customer service just as much as it is about accounting.
- Be methodical in your business debt collections processes. The best way to ensure all of your collectors are being consistent is by writing up a manual with steps to guide them through the process in a way that will be fast, effective, and simple.
Doing all of those things can be time consuming and many companies do not have the resources to make sure this is getting done for each and every invoice. Business debt collections software can help you automate these redundant tasks to streamline the process and automatically track and store all communications, payment histories, invoice due dates, and much more so your collectors have everything they need at their fingertips.
To learn more about how you can improve your overall business debt collections, download “17 Things You Should Be Doing Right Now to Reduce Outstanding Accounts Receivable”. A white paper that walks through many more simple steps you can take today to help your company get paid faster tomorrow.