Collecting Overdue Accounts Receivable
Corporations need to develop the right knowledge and processes to manage the problem of collecting overdue accounts receivable successfully. The failure to prevent and deal with non-paying customers has a devastating impact on small businesses. A company can experience the inability to succeed in circumstances where cash fails to be collected on time or not at all.
Do Some Research:
Before deciding whether to onboard a new customer, research them, and determine whether their organization is genuine. Search to discover info that might have been left by others who have worked with them. This work in advance can prevent a business much concern in the future. Make certain possible clients are reliable and operate with upstanding service practices.
Clients need to know what is financially anticipated from them. Their payment plan must be simple and reasonable. It is helpful to set up recurring billing processes. Also, think about whether it is smart for certain customers to make payment in advance or upon completion. This determination can be made based on their creditworthiness. It is advantageous, for all entities involved, to add incentive for advance payment. An incentive to avoid trying to collect overdue accounts receivable is to supply a discount for customers that wish to pay their billings before the due date.
Vice versa, customers that fail to make payment within time requirements could be assessed interest charges. Consider whether or not it is smart for certain clients to pay upfront or upon fulfillment. Offering a discount rate for customers who pay their invoices prior to their deadline could be a helpful business practice. Conversely, customers who do not make attempts to provide payments when due will be assessed interest costs.
Developing a written agreement for a prospective client to execute is the top method to guarantee a client’s obligation. A contract ends up being the primary step in guaranteeing a mutually truthful company relationship. Ensure to have an attorney prepare the legal document. In this manner, a company can make certain their agreement consists of the necessary elements. If using a lawyer for such a job is not an alternative, consider using a small business contract form template (ie. available online).
Maintaining Quality Files and Relationships:
Monitor each client with excellent detail. When accounts are kept track of, it is much easier to predict their habits reliably and, most critically, to forecast when they may fail to meet A/R payments on time. Issues are often dealt with and avoided entirely if a business arrangement is developed with shared regard and understanding.
Using a 3rd party to Factor Accounts Receivable and collections:
If managing the collection of A/R invoices is too disruptive to running the business and creating a cash flow burden, consider engaging a 3rd party to finance and manage your A/R. There are a number of Accounts Receivable Factoring options in the market – some that will even take the job of collections off your hands.
Dealing with Non-Payment
Decisive Legal Steps:
Accounts Receivable Collection Resources:
Below are links to some additional resources about improving A/R collections:
City National Bank – 7 Tips to Improve AR Collection
Vanguard Systems – How to Speed Up Your AR Collection Process