Accounts receivable management should be looked at like a strategy and a process, not just an accounting function or as the result of doing business. Like any other process or strategy, there are a number of steps that need to be taken for the best result. Be methodical in your accounts receivable management and go through the following 6 steps to ensure timely collection, healthy cash flow, and positive customer relationships.
NOTIFY YOUR CUSTOMER
Notify your customer of their debt. In other words, send them an invoice. Be sure your invoice is sent promptly and includes all of the information the customer needs to quickly make a payment. This would include order information, amount due, due date, agreed upon terms, and where/how they can pay.
Confirm that the invoice was successfully delivered. Did your customer receive the invoice? Do they have any questions? A brief follow-up call a few days after sending the invoice can help speed up payment and serve as a customer service call. If there is a problem with the invoice, your customer is likely to just put it aside and deal with it later. If you call to follow-up, you can answer their questions right away and help them submit the payment sooner.
REMIND YOUR CUSTOMERS
Many customers may need a reminder or two before they get around to sending payment. A majority of people want and mean to pay the invoice, but they forget, are having cash flow problems, lost the invoice, etc. A friendly call, letter, or email may be all they need. Be sure to remind them a long BEFORE the due date. Remember, there are many different types of communications, and timing is everything- this white paper has everything you need to know, suggestions, communication templates, and call scripts to help you do make the most out of each and every customer communication.
Inquire about a late payment. If your customer has still not submitted payment after the due date, something may be wrong. If it is a new customer or one who is usually a problem, you may want to escalate this and avoid the risk of taking on bad-debt. If it is a customer who has been around for a long time or is generally quick to pay, there may be an unusual circumstance you can help them with. Either way, in this stage you should get in contact with them, remain friendly and professional, find out why they still have not paid you, and together figure out how you can get this problem fixed.
INCREASE THE PRESSURE
If you find that your invoice was received, the information was correct, there are no special circumstances, the product or service was provided, and your customer is still not paying, it’s time to get a little more forceful with your collections efforts. Becoming a little more firm in your communications is necessary at this point- be firm, not harsh or threatening. The goal is still to collect the money and breed goodwill between you and your clients.
ESCALATE THE ACCOUNT
There are occasions when it’s necessary to escalate an account to management for higher-level discussions. At this point, the chances of you ever getting paid are pretty slim, and it may be time to start thinking of turning things over to a collection agency. Before doing so, have your management level employee contact the customer, review with them all of the steps your company has taken to collection this debt, and give them a final chance and a deadline, if they do not pay by XXX this will be turned over to a collections agency.
To be effective in your overall credit collections efforts you need to take each and every one of these steps…for each and every one of your invoices- and that is where things can get a little overwhelming.
If you have hundreds or thousands of customers, all with multiple orders and invoices, it’s hard to find the time to take all of the above steps to help speed up collections while also managing invoice disputes and other critical tasks. Accounts receivable automation can take away much of the time-consuming parts of the tasks above, like the invoice generation and delivery, sending reminder letters, tracking aging, running reports, and much more.
Accounts receivable management software puts your accounts receivable and credit collections on auto-pilot with built-in workflow to help your credit collection employees identify who to call, when, and why, with all the information they need at their fingertips to resolve disputes and to flat-out get paid faster. Integrated document management and automation makes it easy to communicate effectively with customers, documenting what you’ve done with insights to measure the results.