Accounts receivable is about getting paid for the work you do. In business, it doesn’t get much more important than that. The process covers every part of the payment lifecycle – finding customers, communicating expectations, billing correctly, and following up on late invoices.
If you’re struggling with late payments here are some simple tips to try.
- Pick the right clients - Before you take on new customers, run credit checks and have them sign written terms, including billing timeframes, and late payment penalties.
- Quick, effective invoicing - Your customer can’t pay until you’ve invoiced them, so make sure you send your bill promptly. Sending invoices straight after work is completed, gets the payment ball rolling.
- Make it easy for your customers to pay you - Offer options like debit, credit, or direct debit to make it as easy as possible. Make sure your invoice has all the right information, including your bank account details, a description of the work or product, the date it was delivered, and any customer requirements such as a purchase order number. Some customers have very specific requirements so ask what they need to see on the invoice. Make the due date clear too.
- Keep a close eye on your unpaid invoices - Check for payment frequently. If an unpaid invoice is past its due date, have a process to follow up – this could include email reminders, statements, phone calls and possibly debt collectors.
- Talk to your customers - A friendly phone call allows you to ask when you can expect payment. This may also uncover any issues you need to resolve.
- Review your clients -If you have clients that frequently pay their invoices late, think about changing their terms – they may need to pay half upfront or use another payment method. In some cases, it might make sense to let them go.
Consistency is key
Having an accounts receivable plan is the first step – the next is following it, every time! From selecting clients to clear policies, prompt billing and thorough follow-ups, it’s all about consistency. That way, you won’t have unpaid bills and rogue clients slipping through the cracks.
Ready to create an effective payment process? Our expert accounting team can help.