|When you are running a business, you might want to track your money properly so that you can control your operations within the business. One of the most common ways that cause cash flow problems is poorly managed Accounts Receivable.
Many events factor into why tracking your cash flows, specifically receivable accounts, can help you smoothly operate your business. Factors such as customers may pay slowly which forces you to cut down on your cash reserves or increase the amount of financing that needs to cover operations.
To make things clear cut, the more receivables you have, the less cash you have available for running your business.
Before you begin the process of dealing with any customers, one thing you might want to do is check whether or not they are qualified to be working with; in essence, are they a trustworthy customer of paying their invoice amount within a reasonable time frame?
Other things you will want to check is their credit scores, are they a reliable customer to be doing business with? Awareness of your customer's background in business will determine a lot with regarding to whether or not you should be doing business with them.
Following these simple best practice ideas could make your business much more successful:
This will ensure your customers receive their invoice right away, avoiding any headaches with the mailing system. Make sure to get an e-mail address from the customer upon departure of service
Document Charges Concurrently
If all the documents related to an invoice have been scanned in or copied, there is no scrambling when it comes time to send it. Project managers should keep track of any documents related to an invoice on a daily basis.
Implement an EFT Payment Method
Many businesses are using some sort of Electronic Funds Transfer (EFT) in order to speed up the process in which you receive money. This method allows customers to directly deposit a payment to your bank account, simply include on the invoice the necessary information in order for them to make a direct deposit.
Review Accounts Receivable Regularly
Constantly track your receivable accounts and make sure to follow up on any accounts that are past due implement an aged receivables report from your accounting systems on a weekly basis, paying attention to those accounts over 20-30 days old.
Use The Telephone
I know you might be in the era of texting is the only means of communication, but a simple phone call will go a long ways. Follow-up invoices with a phone call if payment is not received within a reasonable period. Fastest way to get your money and solve this dilemma is speaking with your customer. If you continue to play the waiting game, your business may suffer.
Offer Discounts for Early Payments
What better way to get your customer to pay sooner than offer them some money in return? The most common discount offered is a 2%/10, net 30 days. This means that if the customer pays within 10 days, they receive a 2% discount, with the total amount due in no more than 30 days.
Maintain A Collections Record
For each over-due account, keep a log for when follow-up calls or e-mails were sent, along with a record of what the customer may have said during those interactions. This will simply allow you to keep up to date with where you are at with the customer in the process.
With these simple tips, or best practices, you should find that your management of accounts receivable will be more efficient and helpful to your business.