Booking new business is your life blood, but the cash doesn't really count until you get paid. How to speed up your accounts receivable.
The amount or value of the products and services you sell doesn’t truly contribute to your business until you get paid for them.
The more you can incentivize clients to pay quickly, the more empowered you are to use your hard earned money to reach business goals, whatever they may be.
But how do you actually do that? Here are four simple tips to speed up your accounts receivable.
Make Your Policies Known
As a business owner, you write the rules and set the tone for the processes and procedures that your staff, vendors and customers follow. You have more control over the cadence of your accounts receivable than you may realize. Getting clients to pay quickly begins with the policies that you communicate, and the degree to which your accounts receivable team enforces them.
Before you provide service or enter into a working relationship with any client, provide written policies about your payment terms, including the forms of payment you accept, when payment is expected, and penalties that may apply—including late fees, discontinuation of service or collections efforts—if a client’s account becomes past due.
Eliminate Unnecessary Waste
Regardless of your industry or business model, it’s probable that the amount of your clients and customers who regularly use email far outweighs the number that don’t. Aside from the resource-related hard costs that paper invoices present in the form of time, and supplies like ink, paper and postage, they add uncertainty to the accounts receivable process.
When you send a hard copy invoice in the mail, you lose control over when the envelope arrives, and whether it reaches its intended destination. There are many cost-effective cloud-based accounting tools designed to accommodate the invoicing needs of small-business owners, including the ability to automate email reminders to clients when invoices are past due, and set up recurring monthly billing.
Some even offer the ability to track whether an electronic invoice was received and opened so you can identify when an invoice was lost or not received, and when it’s simply gone unpaid.
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Accept Various Forms of Payment
When the customers’ only option is to pay by cash or check, your accounts receivable are at the mercy of their budget. Further, you may lose opportunities to serve paying customers altogether: in one study by Community Merchants USA nearly 70 percent of consumers ages 18 to 34, and nearly 60 percent of those ages 35 to 44, said they will only do business with a company that accepts credit cards.
Whether you integrate a payment gateway into your website, accept mobile payments as soon as orders are placed, or work is complete, (or use a combination of these approaches) accepting credit and debit cards is one of the simplest ways to quickly collect the money you’re owed.
Though you’ll pay nominal fees to your payment processor (which usually range from about 1 percent to 3 percent of the transaction amount), the funds will typically reach your bank account within 72 hours after the transaction is approved.
Use Professional Invoice Templates and Language
The professional presentation of your invoice can impact the level of attention it receives. Choose an invoice template that customers can easily open and view, regardless of the size of their screen. Include your logo and the direct contact information for your accounts receivable team. Provide specific details explaining each charge, along with any applicable taxes or discounts.
Replace ambiguous terms like “net ten” or “due on receipt” with specific due dates, and the exact amount the customer will owe if payment isn’t received by that date. Thank clients for their business and timely payment. Note the forms of payment you accept, along with clear instructions for how to pay. If you accept checks, be explicit about whom to make checks to and where to send them. If you accept credit cards on your website, provide the direct link where customers can pay; allow for guest checkout and eliminate unnecessary form fields for an efficient online payment experience.
Your accounts receivable processes dictate the financial health of your business. Though not all clients will pay quickly, you can greatly impact the percentage of those that do by being mindful of the policies and tools you have in place to serve them.