Companies across industries and of various shapes and sizes have trouble collecting invoices on time, but before you can solve the problem, you must identify what exactly is causing it. Are your accounts receivable problems due to poor invoicing procedures, incorrect information, a lack of resources? Below are 5 of the most common issues we’ve seen crop up time and time again as we work with customers to solve their issues and improve their accounts receivable process. Do any of these sound familiar?
Most customers want to pay you on time, but they won’t if there are problems with the invoice. Find out why customers aren’t paying you on time. Are your invoices missing the customer purchase order? Are they being sent to the wrong person or the wrong address? Is the billable rate or freight rate wrong? Are they tax exempt, and you continue to charge tax? Review all late invoices, talk to your customers and your accounts receivable staff, and identify what’s wrong. Keep track of common invoice problems so your team can address them and avoid them in the future.
INVOICE DELIVERY PROBLEMS
Are your customers receiving the invoices? Are they receiving them early enough to pay you on time? Many companies only process invoices once or twice a month. If the invoice is created on the first of the month with Net 30 terms, and you don’t send the invoice to the customer until the 15th of the month, you’re only giving the customer 15 days notice to make a payment on time. Consider processing invoices more frequently and sending invoices to customers electronically so they have more time to review and to pay the invoices before the due date.
Your collections process is only as good as the data that supports it. Most businesses do not have a formalized credit and collections process or software system to support it. As such, they are working with outdated Excel spreadsheets, old Aging Reports, or they enter information manually into a CRM system to keep track of what they’ve done or what they need to do. Inaccurate, outdated, and hard to access information is not effective to helping you get paid on time. If you feel as though your data is the problem, you may want to consider a software solution to help you better organize, act on, and track this critical information.
Do you have enough people working on accounts receivable? Do they have the proper training and access to information to be effective? Do they have systems to help them streamline their processes? Accounts receivable is likely your largest or second largest asset. Make sure that your team has everything they need to be as effective and as efficient as possible, so you can get paid on-time, every time. Identify your team members, roles and responsibilities, and solicit their feedback as they will be able to tell you what they need, what’s working well, and areas where they feel your business could dramatically improve.
In most cases, businesses fail to get paid because the invoice has problems, is sent too late, or the collector is working with bad data. But there are, occasionally, other reasons why business customers don’t pay on time. The customer may be experiencing cash flow problems and is otherwise unable to pay, or perhaps they are in a very small minority of business customers that simply refuse to pay their bills on time and are practicing cash flow management. If the problems you’ve identified are ones that you can fix, what are you waiting for?