In an effort to improve the consumer experience, many businesses offer flexible payment options to their customers. These can include paying in installments or buy-now-and-pay-later strategies. Undoubtedly, offering these setups can help companies attract and convert more clients. But doing this can also take a toll on the business.
Offering credit to clients disrupts a company’s cash flow. You’re putting a lot of money on your products and operations, but you’re not getting any immediate profit. You may find yourself unable to pay suppliers, employees, and other costs.
But we’re not saying it’s wrong to be flexible about payment options. It’s fine to have accounts receivable, but this process should be managed effectively. Here are some tips to help you improve your accounts receivable collection.
Keep track of accounts receivable
Collecting invoices relative to pending payments will not cut it. Your business should have an organized record of all accounts receivable. You can have a tool to manage this, or you can simply use a spreadsheet. Either way, create a database of all pending payments. State the client’s name, their contact information, the amount due, and the invoice due date.
Knowing when invoices are due will help you pursue them in time. And it will reduce the risk of payments being uncollectible. Make sure you can collect on or until two to three months past the due date. If more time passes, chances are you will have a harder time collecting that payment.
Ramp up your collection efforts
Many businesses opt to wait for the client to make their payments. But a lot of things can go wrong because of this lack of communication between the parties. You should be proactive in pursuing accounts receivable. Don’t be afraid to ask for the payments when the due date comes. Weekly reminders will be handy to make sure your clients know they have a pending obligation with you. If you see fit, you can acquire the assistance of merchant services for debt collection.
Inspect your current invoice
Maybe the reason your accounts receivable is not being paid on time is an issue with your invoice. Missing information or ambiguous data on invoices can make it difficult for your clients to pay. Remember that they, too, have to review what they’re spending money on. So if there’s something wrong with your invoice, they may take more time to verify it.
Take a look at your current invoice and determine if there’s anything you need to change. You should make it as easy as possible for your clients to settle their obligations. Ensure that your invoices are clear, correct, and complete at all times.
Get creative with the collection
One way to ensure quick payment from your clients is to offer incentives for early settlement of obligations. You can motivate them to pay early by giving discounts or other benefits. For example, you can offer a 2% discount on the total amount if they pay within ten days.
But before doing this, talk to your financial advisors first. Make sure your company can afford the discounts you want to offer. Remember that every dollar counts when it comes to managing your cash flow, so seek advice about your collection methods before implementing them.
Managing cashflow effectively is detrimental to the success of a business. Take these tips and improve your collection efforts, so you can maintain sustainability and growth in your company.