Ways to Improve Accounts Receivable Collection

Accounts receivable refers to the amount a customer owes a business for the products or services that were delivered to them but not yet paid. A company gives a customer a certain amount of time to complete their payment which can range from a few months and even a year. This is usually no big deal to most companies. However, the amount of unpaid receivables increases through time which can affect your business’ cash flow. One way to maintain this is a speedy and prompt collection of accounts receivables. Here are a few ways to make your collection more effective.

Updating Your Software

Most companies use accounts receivable software to manage their collectibles more efficiently. Lots of accounts receivable software is being released with plenty of amazing features added to improve functionality and usability. One of the key features of great software includes better tracking in terms of paid and unpaid invoices. Contact an accounts receivable automation provider to help you upgrade your software.

Proper Billing

Make sure to get all the necessary information when invoicing to make billing more efficient. Also, getting the accurate mailing address and the right contact number can help speed up the collection process. When bills arrive promptly, your customer can pay his balance at the right time.

Negotiating Payment Terms

You can negotiate with your customer on what terms suit them. Whether it is a few days, a month or a year, offering payment terms that are favourable for the customer increases the chance of them paying on time. You may also encourage early payment by providing perks such as discounts or rebates when they pay before the due date.

Aging Reports

One of the best ways to organize your collections is to group your clients into payment categories. Create a category for clients paying within 30 days, 30 to 60 days, and more than 60 days. That way, you have an insight on which clients are overdue and when to extend your collection efforts.

Clients Should Adhere to Payment Terms

After negotiating with the client about their favoured payment terms, your job is to make sure they adhere with it. Some companies fail in this and simply allow their clients to pay even past the due date. Sending your clients a friendly payment reminder a few days before the due date can help increase their adherence with the terms. Also, you can discourage late payments by enforcing interest when paid past the due date.

Make a Plan

Make your collection more strategic by sticking to a plan. Setting goals for certain days can help you take control of the collection process. You may task your staff to contact and remind clients 2 weeks before the due date. Have a second reminder 5 days before the due if there’s no payment received. Sticking to a plan helps your staff manage collection while also running day-to-day business tasks.

Those tips can really come in handy especially if you already have a huge amount of business money stuck in unpaid accounts. By improving your accounts receivable collection, you can make more use of your money through fast conversion of sales to revenues.


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