Unpaid invoices hurt the cash flow of your business. Rather than turn to the default solution of increasing sales, look into improving the way your business manages its accounts receivable.
What is accounts receivable? Accounts receivable (A/R) is the amount your customers or clients owe for services provided or goods that your business sells. Your client or customer does not pay for the service or item right away, therefore accounts receivable is an “I Owe You”.
Let’s look at some tips your business can follow to maximize its accounts receivable process.
Invoicing your customers timely can almost ensure that your business is paid timely.
Furthermore, timely invoicing improves customer satisfaction because in their eyes your business is organized and efficient. Your customers want to do business with someone that is organized and efficient.
Being organized and efficient builds trust, which could lead to increased business down the road. People like to do business with those they know, like, and trust.
Finally, invoicing timely reduces the risk of making that uncomfortable phone call or sending that email to those customers or clients that have not yet paid you.
Send Reminders or Pick Up The Phone
Invoices do get lost in the mail or accidentally deleted from the inbox. Or maybe the client or customer forgot that payment is due. …or maybe the customer or client is just…one of those.
Help your customer or client help you. Send a reminder or pick up the phone. As uncomfortable as this part of the A/R process is, your business will thank you and so will your clients and customers.
Automate: Set Recurring Invoices
Have repeat business from the same customers and clients? Use technology such as QuickBooks Online or Xero to automate those recurring invoices.
Doing so reduces the time spent on your invoicing process, which gives you the ability to focus on other things. Furthermore, automation nearly guarantees that the invoices are processed timely.
Deposit Checks Immediately
There are many clients or customers that still prefer to write checks.
Therefore, when that check arrives, deposit it right away! Don’t wait!
Timely deposits keep your cash flow steady.
Honor The Terms of Payment
Most of us receive a utility bill each month. That utility bill always states the date that payment is due. If payment not received, what happens? Service is interrupted and a late fee is added.
Follow in the footsteps of your utility provider. Include terms of payment and a due date on the invoice.
Also don’t be afraid to assess a late fee for late payments. Or maybe provide a discount for those that pay early.
Lead by example. If you don’t honor the terms stated on the invoice, don’t expect your customers or clients to either.
Respond to Clients and Customers Timely
Communication should not be one-sided.
If a customer or client asks an invoice related question, respond as soon as you can. Really if you want a customer or client to respond to you, you must also respond to a customer or client.
A/R isn’t everyone’s jam.
If you, as the business owner, are unable to manage the accounts receivable process, and you do not have anyone to manage the process in-house, consider outsourcing to a bookkeeper.
Sure outsourcing might cost you some money in the short term. However, consider the long term gains to your business because you had someone staying on top of the accounts receivable process.
Cheers to a healthy cash flow!