Managing your accounts receivables is crucial to maintaining steady cash flow in your business. Here are three accounts receivable best practices you can implement to clean up your books and bring in the money due.
1. Create & Maintain AN AGING REPORT
Build an accounts receivable aging report that itemizes invoices by due date. Any invoice over 60 or 90 days merits immediate review and likely an outreach to the customer. Don't assume they're dragging their heels on purpose. Maybe there is a discrepancy that the customer hasn’t had time to discuss internally. Perhaps the invoice went to the wrong person. Or it's possible they need to make a payment arrangement. A simple phone call may be the key to identifying the root cause of the delay to ensure old invoices get paid.
2. DEVELOP & Communicate A LATE PAYment POLICY
Create a standard policy and communicate it clearly to your customers. The policy should include financial penalties and the specific actions you will take when an invoice reaches a certain age (e.g., restricting services to customers past 60 days or sending accounts to collections at 90 days). A strong, clearly articulated disincentive to pay late will often prevent delays in the first place.
3. Meet with your bookkeeper MONTHLY
The first week of the month is a good time to catch the prior month’s late payers. But the day of the month is a lot less important than adhering to the schedule you establish. If your bookkeeper knows your sit-down is approaching, he or she will be spurred to make the customer calls and reminders necessary to ensure the list of past due accounts is as short as possible for your meeting.
When accounts receivable best practices are firmly in place, over time you should see more consistent cash flow and fewer past due accounts.
Still Need a Hand with REceivables?
Increasingly, small business owners are turning to outsourced accounting to handle receivables and other finance functions for their company. Talk to us about how we transform these accounting tasks into a competitive advantage so you can focus on growing your business.