Outstanding accounts receivables are among the most significant issues that businesses face. Reducing the time it takes receive your outstanding account receivables may seem like a distant dream, especially for businesses whose mode of payment is usually credit. While some clients may prefer to pay in advance, credit systems are commonly used for businesses and often reach a conclusion smoothly, apart from certain instances. Regardless, businesses often seek solutions to reduce their receivables for over 30 days and strategies to prevent it from occurring in the first place. Below are some of the tips to help you reduce the time it takes to receive outstanding payments.
State Payment Terms Clearly on Invoices
Businesses often have extended lists of terms and conditions, which clients do not read. While stating your terms and conditions is a good practice, the terms of payment should be clearly mentioned in bold on the front page. If you want payment in a week, state clearly that you want it within that timeframe and failing to comply will result in penalties. By clearly stating these terms, you put your payment policy in front of your client, which often results in a considerable decrease in outstanding accounts receivables.
Devise a Standardized Follow-Up System
Debt collection is often based on past precedence. If the company is known for its laid-back attitude for payment collections, clients will not see repayment as urgent and may delay their payments. In addition, some businesses have no system in place for debt collection and are usually dependent on their client’s will. One way to handle this issue is by emailing the invoice 7 days prior to the payment and again 2-3 days before the payment due date. This sends a strong signal to the client that you are serious about outstanding accounts receivables and would like them to comply with company policies.
In case someone does not pay up on the specific date, an arrears letter must be ready to be sent on the following day. Even after the letter is posted, you must have a follow-up plan to determine how to deal with defaulting clients. Everyone in the company must agree on the terms and policies in place to have a clear understanding of their role in the repayment process and the potential course of action.
Be Proactive
Having a system in place is not enough when it comes to debt collections. Being proactive means that you must ensure the system is being followed properly. Additionally, it is critical to know that everyone understands the Standard Operating Procedures and are collectively working towards clearing outstanding accounts receivables. Although you have a system in place, there should be a dedicated resource assigned to making phone calls to creditors or following-up on outstanding payments.
Automate the Process
Having an automated software to manage your bookkeeping needs is invaluable to your business. There are many software options that manage accounting responsibilities and track everything from your sales invoices to maintaining income statements and balance sheets. Having all the information about your customers in a software program allows it to send and receive critical information at designated times. Additionally, it improves the efficiency of outstanding accounts receivables which creates a professional image of your company. This software allows you to keep and edit notes on specific clients, which is accessible to every member of the collection team and other concerned departments. Therefore, accounting software with automated processes enables everyone to know the current stance of the client regarding their payment and outstanding accounts receivable.
Use Professional Help to Collect Outstanding Accounts Receivables
If you have implemented all the above-mentioned steps and still failed to collect payments, you may need to seek expert opinion. Debt collection experts can devise a plan tailored to your business model since they have the skills and proficiency to carrying collection-related tasks for many businesses. They can help you identify your possible point of failures and highlight key pressure points for clients who are the cause for concern. Reputable professional help is a viable option that may be considered, if needed.
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