Blog

How to speed up the collection of your accounts & Increase your cash flow

Do you have strong sales but still, find yourself in cash? The solution may be to reduce the time it takes to collect your accounts receivable. Here's what we need to do.

1. Speed up your invoice making

Do you collect receipts and send them all at the end of the week or month? It’s adding more time until customers start paying you.

Do not leave after the invoice after delivery. Currency is just an extension of the ordering process and you should be able to generate it automatically from your order. If you need an additional layer of approval, you may be able to take a rule-based automated approach flagging exceptions rather than requiring a manual review of each invoice.

 2. Use milestone invoicing

If you have large projects that cover a long period of time, pay the bill on milestones instead of completing them. This can happen when you order physical supplies when certain goals are met, or over a period of time.

In addition to getting money on the project as soon as possible, you reduce the risk of not collecting the full amount if your customer does not pay.

3. There are clearly invoiced items

Customers may delay paying bills that they do not understand or do not agree with. To reduce the number of questions you receive about receipts, use clear item names with detailed descriptions. Don't use code or shorthand that your customers may not understand and don't combine everything.

This should not make the customer feel like you are padding your invoice.

4. Don't feel bad about asking for payment

You should never feel bad about asking for money. This way you get months old receipts from customers who are no longer in business.

Have a regular schedule for email or invoice mail. For example, you can invoice on delivery, send reminders one week before the due date, and then send weekly or bi-weekly reminders until receipt.

You should also start weekly or bi-weekly phone calls once the invoice is gone. Not all previous payment accounts attempt to avoid payment. Some may have forgotten the invoice, some may have had an address or staff change that caused the invoice to crack.

5. Be smart about increasing credit

Sales are not sales unless you get paid. Don't give credit to anyone just to increase sales. You should have a defined approval process with deposit amounts and credit limits based on each individual customer's financial situation.

If you have salesmen or managers who are encouraged to increase sales, make a credit decision to someone in a different department. Finally, if a customer's financial situation changes or they fall behind in payment, don't be afraid to lower the customer's credit limit.

6. Be flexible with payment options

Some customers will have extremely strict payment processes. Some may insist on mailing paper checks, others may use only direct deposits, and some may prefer credit card payments.

Accept payment options as much as possible so that customers can pay in their regular workflow instead of pushing you backwards. Although this means eating up extra transaction fees, improved cash flow will almost always be beneficial for smaller additional costs.

7. Know your account receivable Ageing Numbers

Every business has a unique mix of customers and what works best for one may not be right for another. Textbook advice works in most situations, but like anything else, optimizing your collection helps you know your numbers.

Run monthly reports showing your account receivable ageing and collection time. This data will help you identify trends and common issues so you can continue to optimize your collection process.

#recoveryprocess #alliancetaxexperts #accountsreceivable #incometax #tax #debtors #balancesheet #businessconsulting