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7 ways to improve the collection of your accounts receivable
Your cash flow is a key indicator of the financial health of your business. One of the most important ways to ensure good health is to manage your accounts receivable more efficiently. Here are seven ways to keep cash flowing in – and your business moving forward:
- Get to know your customers. When you have a personal relationship with your customers, they are more likely to pay you.
- Get paid in advance. The best way to ensure payment is to ask for money upfront. You could start by requiring customers to make a deposit or pay a retainer when they sign on with you.
- Invoice immediately. It's a simple fact: the sooner you invoice your customers, the faster you'll get paid. Consider billing your customers electronically versus sending invoices in the mail to give customers a few extra days to pay.
- Offer more payment options. The more ways you give customers to pay, the more likely it is that they will pay you. Consider taking payments by phone or online and offering the ability to make recurring payments charged to their credit cards or automatically deducted from their bank accounts.
- Run aging reports. When you're busy serving your customers, it's easy to lose track of your outstanding invoices. One way to ensure that doesn't happen is to regularly run accounts receivable aging reports, which will help you keep track of late invoices. Then, you can send your customers payment reminders.
- Offer discounts for early payments. Give your customers an incentive to pay early by offering them a discount. Some companies also charge late fees for payments. If you do go the late fee route, make sure you clearly indicate the fees for late payments on the invoice.
- Establish payment policies with customers. When you sign up a new customer, be sure to review the payment terms even before you do business. The customer should know how and when you will invoice them, when payments are due, and any fees that may be assessed for late payments.
Remember, your accounts receivable is an asset, but only if you can turn in into healthy cash flow.