In order to keep your accounts receivable process working as smoothly as possible and keep everything up-to-date, you need to evaluate the process. The first step is to look at your previous year’s accounts receivable performance metrics and compare them to your goals. If you’re falling behind, then the next step is to spruce up your collections process by adding to your policy and fine-tuning your approach.
There are a few accounts receivable management tools that are always helpful to use when you feel like your collections process is falling short. We’ve outlined them below.
UPDATED CREDIT AND COLLECTIONS POLICY
Do you have a credit and collection policy in place that outlines the rules and processes for sales and collectors to follow? This can be a valuable tool to ensure sales people and collectors are following best practices and procedures designed to increase sales, while also protecting your company from bad debt.
Past research has shown that only about 20% of credit departments have formalized policies (Credit Research Foundation), and according to Credit Today, more than 50% of those who do have one, fail to update it frequently enough for it to be effective.
Just because you have a credit and collections policy does not mean it will be followed by your team; especially when it comes to collecting invoices. We’re not saying company collectors are purposefully skipping over steps, but they may forget one or not have enough time to take each and every step with each and every invoice. With accounts receivable automation you can build your policies and procedures into the system; now collectors won’t have to remember the steps and it will save them a ton of time. With account receivable automation, the system either automatically completes the steps in the workflow you’ve defined or prompts the collector to do so.
Many companies who feel their accounts receivable performance is poor think it is because they are understaffed. Usually the first reaction is to hire an additional employee to keep up with the heavy workload. A lot of the time you can eliminate the need for more staff and the costs associated with that by automating the process. In other cases, a part time employee or another full time employee may truly be needed.
ELECTRONIC INVOICE DELIVERY AND PAYMENT
If you’re currently managing the billing and collection process with paper, it’s time to kick this to the curb in 2016. Snail-mailing invoices and waiting for customers to receive them, process them, and return the check can add many days to the invoice to cash process. Further, it opens your customer up to fraud risk. Electronic invoice presentment and payment solutions (EIPP) allow you to submit invoices and accept payments from customers online. This technology makes collecting payment from customers much faster, much easier, and far less expensive than traditional paper-based processes.
CUSTOMER SELF-SERVICE OPTIONS
More than 70% of customers, especially small and medium sized business customers, prefer self-service options like an online portal compared to phone or email support. Can you blame them? Everyone is busy and nobody wants to waste time playing phone tag or waiting for email responses strictly during business hours. You can give them this control with an online portal where they can login to retrieve invoices, pay bills, ask questions, view statements, chat with support reps, and more 24/7. By granting customers the control and convenience they want, you can significantly increase on-time payments and customer satisfaction. It really is a win-win.
When armed with these four tools, or even one of two of them, you’ll be surprised at how quickly you can reduce the amount of outstanding A/R on your books for healthier cash flow and happier customers.