Poor management of receivables can be the kiss of death for your business. Until an invoice is paid, a sale really isn’t a sale. Don’t choke your cash flow, which is crucial to business success. Here are just a few tips to get you on the right track.
Invoice More Quickly
Terms means you are already waiting at least 30 days for your money; if you are not invoicing immediately after a product or service has been delivered, the wait for that money is even longer. This is one of those tasks that is commonly batched, with a bunch of invoices being sent out at once, maybe once a week or whatever your schedule. But, if you are strapped for cash, it is worth it to do each one individually. If you are really strapped for cash, invoice factoring is a commercial finance option that may work for you, though you must weigh the immediate receipt of cash against the fees for the service to determine if this is the best route.
Extend Credit More Carefully
In an attempt to win more business, it is tempting to take on any customer that comes your way. But, more business means little if a customer is not paying his invoice, and as you know, a sale is not complete until this crucial step has been taken. Be careful about extending credit. Do a more thorough check before allowing someone to make a purchase. And if you do decide to offer terms, keep the amount small at first and increase as the customer demonstrates timely payment habits.
Dealing More Effectively with Late Invoices
For a variety of reasons, late invoices go unexamined. Maybe you get busy; maybe you are not doing the best job of tracking payments, and have no idea how much money is outstanding; maybe you are well aware payments are overdue but are reluctant to broach the subject with your customers for fear of alienating or offending them.
But, you have a right to timely payment when you have delivered your products and services as promised. Reaching out to customers does not have to be some sort of adversarial encounter.
If customers are struggling financially, there will definitely be some sort of prioritizing going on when it comes to bill payment, and the vendors from whom they haven’t heard a peep from about the late payment will not be at the top of this list. There is the tendency to not deal with the payment until they are approached about it. By reaching out, you move up the ladder.
First, check on the account to make sure everything is kosher with the order, such as everything being delivered on time, no complaints, pricing disputes,etc…
Once you have the background info, reach out immediately. You might want to start with an email, but it might be best to move right into a phone call. Remember, it can be a friendly encounter. Inquire if there were any problems, and ensure the invoice was received. Do not end the phone call without some sort of action being agreed upon, such as the payment being sent out, a partial payment being made, or an agreement of an installment plan with a set date for the first payment.
If you can follow these three tips, you are well on your way to getting your receivables back on track.