If your business is at a point where you know you can improve cash flow, there are many things that you can address internally that can advance your chances of better cash flow.
If you’re running a small business, you may be cleaning up your books anyway to hand them off to your CPA for tax season. So why not in the process, take a hard look at your accounts receivable process and make any necessary changes.
Here’s a checklist of must-haves to improve your internal accounts receivable processes for the New Year.
Keep up-to-date information on your customers
The management of your customer information is vital not only to your accounts receivables but also to other areas, such as marketing and information flow. If you’re going to firm up your accounts receivables in the coming year, you’ll need to double down on maintaining accurate and up-to-date records of your customers. That should include details such as all contact information, current address, any credit terms issued to that customer as well as purchase history.
Solid invoicing procedures
It is mission-critical that your business sends out clear, legible, and detailed invoices for any products or services you have rendered. Your invoices should be issued regularly, without missing dates, and include everything essential to getting paid. That should include information such as due dates, payment terms, itemized charges if applicable and any other information needed to get that paid. In short, don’t procrastinate on invoicing your customers.
Be clear on credit terms and policies
You must clearly define all credit terms with your customers. That includes payment expectations, deadlines for payment and any late fees if you choose to implement them. Being clear on your credit policies to your customers will help manage expectations. If there is a dispute, how and when you expect to be paid should be crystal clear.
Follow-up procedures for non-payment
If you haven’t done so already, you must implement a systematic process for following up on overdue payments. That should include reminders either by mail or email, statements after a period of time and letters indicating possible collection activity for outstanding balances. Any communication, whether by phone or in writing, should be cordial and diplomatic. If your staff requires training, make that a goal quickly.
Payment options for customers
If you want to get paid on time, you’ll need to offer multiple payment options that make it convenient for your customers to pay. Gone are the days of only accepting checks for payment. Make sure you accept credit and debit cards, as well as other forms such as Apple Pay and payment portals, on your website. If you have a physical location, meet with your payment processor and ensure you have the latest payment terminals available.
Part of a solid accounts receivable program for your business is ensuring you can establish communication channels for various reasons. That would include addressing any payment concerns. If customers are not paying, your team must open those communication lines to the best of their ability. And by the same token, respond promptly when customers reach out to you regarding payment issues. Make sure your team is empowered to provide adequate assistance.
Monitor your cash flow consistently
Another mission-critical part of running a healthy business is monitoring your cash flow. You should regularly monitor cash flow and if possible, try to spot any trends in your accounts receivables. Meet with your bookkeeper regularly as well as your CPA. When you monitor your cash flow, you can see trends such as a higher number of delinquencies, which must be addressed.
Use a third-party collection agency for delinquencies
We’ve said this often but if you are running a business, you will have customers that do not pay or at the very least pay later than you’d like. In many cases, after conducting your internal accounts receivables procedures and follow-ups, it will be necessary to hand this off to a reputable debt collection agency. You must consider debt collections an important part of the accounts receivable process. Many businesses would consistently experience negative cash flow without the assistance of a collection agency.
Work with an agency that prioritizes respect and dignity with your customers, offers a low-cost solution to your debt collections and makes it easy to enter accounts. And that’s a plus if they have industry expertise, such as lawn care company collections.