Essential Tips to Stay on Top of Your Accounts Receivable

Technology Plus Human Element
Equals A/R Success

You’ve made the sale. You’ve sent the invoice. Now what?

Indeed, you can’t expect every customer to be an “upstanding citizen” and pay you on time — or at all — without some intervention. That’s why staying on top of your accounts receivable is crucial to facilitate smooth cash flow and, hopefully, to avert the scenario of going to collections. The following are five essential tips that can set you up for success.

Take Advantage of Technology

Customers’ capacity to pay isn’t the only factor determining whether payment materializes. Crucially, payment should be easy, without logistical or technical roadblocks for the customer.

Implementing electronic billing and online payments is an important first step to facilitating timely payment. You wouldn’t believe how much of an impediment to payment that writing a check and putting it in the mailbox can be for the average customer these days! That said, those who still prefer to pay the “old-fashioned way” maintain the ability to receive payments in the mail and over the phone.

Using technology to automate parts of the process can save you time while ensuring you don’t forget to stay on top of your receivables. The various accounts receivable software products available on the market can automatically send customers invoices, payment reminder emails, and late payment notices.

Don’t Rely on Technology Alone

Once you start automating your accounts receivable, it might be tempting to sit back and feel secure that payment will come through. Don’t! The human element is still an essential part of the process.

Even though your software platform has sent the initial communication surrounding payment and multiple rounds of follow-up communication, some payments will inevitably lag. First, it’s important to thoroughly review your receivables to identify which customers need additional outreach regarding payment. Then, don’t hesitate to pick up the phone and call them. If you send a payment reminder via email or snail mail, customers may claim that the message went to their spam folder or that the letter got lost. But if you reach them by phone, they have no plausible deniability that the reminder was received.

Be Clear and Proactive

Setting up an effective accounts receivable operation begins with outlining clear terms for payment if you’re allowing purchases on credit. Whether a payment is due within 15 days, 30 days, or otherwise, ensure that the required timeline for payment and any potential late fees are featured prominently in all communication with customers.

Preventing late payment also starts before the payment is late. Send the customer a reminder at least one week before payment is due, and if the due date has indeed passed, don’t delay sending a prompt late payment notice and persist with follow-up communication at regular intervals.

Another form of being proactive on accounts receivable is offering discounts that incentivize up-front or early payment or designing payment plans. In perception, discounts decrease your profit margin. Getting paid faster ensures robust cash flow, mitigates risk, and saves you the time and headaches associated with chasing delinquent payments.

Don’t Be Afraid to Ask for Help

Even if you’ve implemented all of the strategies outlined above, there’s still no guarantee that every payment will come through. In the instance of sizable accounts receivable that are lingering, despite your best efforts to collect a payment, you may need the assistance of a trusted advisor. At some point, the time you’ve devoted to the process will be a sunk cost, and an outside expert can finally enable you to get the transaction over the finish line.

The professionals at BARR Credit Services can help you sort through your options and determine whether or not it’s time to send the customer to collections. We can also provide preventive solutions through guidance on setting up your accounts receivable process for success.

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