A New Year is upon us and hopefully a new season of busy activity for all you small business operators.
Whether you are a lawn care or landscaping professional, contractor, a plumber or electrician or any small business that gets busy during the spring and summer months, it’s time to review your accounts receivable process before you get too busy.
Yes we’ve spoken about this before but have you really taken the time to button things up and improve your procedures?
If not, carve out some time before you get busy and make these happen.
Why? Because one of the biggest reasons small businesses suffer from cash flow problems is the time between service and actual payment.
Want to get ready for more on-time payments this year? Check out our must-haves for building your cash flow in the coming year.
Book a meeting with yourself once a month…at least
Sit down in front of your computer, open up your Gmail or your Outlook and create a recurring invite and title it “Invoicing.”
How you structure this recurring event in your calendar may be dictated by your business type. But it should be at least once a month if not more frequently. And unless there’s an earthquake or a volcano eruption, never miss these meetings with yourself.
If you’re fortunate enough to have a team behind you, review the frequency and consistency of how they are invoicing for your business. Never get to it when you can. Have set times regularly to invoice.
Invoicing consistently and on time is one of the simplest tasks your business can conduct to increase on time payments from customers.
Quick tip. Decide the best time to set up these recurring invoicing sessions. Do not schedule them at a time during the week when you know other interruptions could get in the way.
Review and adjust payment terms for customers
Now is the time to see if your payment expectations are effective enough to get customers to pay.
Take a hard look at your accounts receivables from the previous year and see if any adjustments need to be made. Were people paying you on time? Did customers complain about payment terms? How many disputes did you have with customers regarding payments over the past year?
If you feel your payment terms can be tightened up, make an effort to do so. And make sure anyone you have working that is customer facing, understands the importance of conveying these payment expectations to your customer.
Let’s face it, everyone who deals with customers in your organization plays a role in the accounts receivable process.
Review the entire customer journey
The more welcome and comfortable customers feel doing business with your organization the fewer delinquencies you might see. It’s just common sense.
Taking that one step further, if your business is going to great lengths to satisfy your customers, and to ensure that once the job is done, they are happy with the results, you may see more on time payments.
Now is the time to review the customer experience from start to finish. How do you pick up the phone, how you advise the customer, how efficiently you can serve that customer and to a greater extent, how much respect is given to them during their time with you. How quickly do you respond to issues?
While a multitude of factors play into a customer not paying you, one that is treated poorly will certainly be more challenging when it comes to nonpayment.
Bottom line, review every step of the customer experience.
Review every step of the accounts receivable process
Before your business gets incredibly busy this season, take the opportunity to review the entire accounts receivable process and make any necessary adjustments.
This includes the above mentioned payment terms, your billing procedures and timing, the methods of accepting payments, follow up procedures for customers that do not pay and further tactics for delinquent accounts.
If you are a lawn care company and send invoices in January for the prior six months of lawn care service, put an end to that right now.
If you have a team or bookkeeping company, make sure everybody is on the same page regarding the process accounts receivables go through.
Outsource your debt collections and bookkeeping
Outsourcing your debt collections and bookkeeping is a smart investment if you do not have the time or resources available to adequately monitor customer payments and accounts receivables.
Your business may be struggling with cash flow but it will only get worse if you don’t make the decision to outsource these critical parts of your business.
The right bookkeeper can also work closely with your collection agency to ensure seamless workflow from delinquency to entering accounts. If customers do not pay, your bookkeeper can enter those accounts and start the collection process without waiting.
Hiring the right debt collection agency and bringing in an experienced bookkeeper will take a mountain of stress off of you. And it will allow you to do what you do best, run and grow your business.
If you’re analyzing your accounts receivables, contact us today for a free consultation!