Any company can be great at making sales and providing services, but even the most successful operations can struggle with cash flow by using time-consuming and error-prone manual A/R practices. In fact, 60% of businesses have faced cash flow issues at some point, which can hinder your ability to pay vendors, employees, or invest in new opportunities.
Here are 3 ways to improve your collections processes:
1. Be Smart About Invoicing and Collection Efforts
As with anything in life, if you want to get ahead, you need to be proactive. That goes double for invoicing and collection efforts. Using automated A/R software is one way to remove much of the administrative labor so your team can focus on smart collection efforts. Here are a few ways to be proactive and ensure you get paid:
- Send invoices quickly – The minute the job is complete or as soon as the contract dictates, you should send an invoice. Sending invoices immediately sets the standard and opens a dialogue early-on about payment. Through A/R automation, invoices can be automatically sent to clients after a project is completed, saving your team time and effort. You can also incentivize early payments to get invoices paid in a timely manner.
- Perform credit evaluations and set limits – Improving your accounts receivable collection does not start after the invoice is sent; it begins long before that. When working with a new customer, perform credit evaluations and set limits to ensure that they will be able to pay for products and/or services. Setting credit limits can keep you from getting burned in the future.
- Work alongside clients who are struggling to pay – If a client is struggling to pay, it does not help to send threatening collection letters in hopes something will change. Be proactive, follow the principles of receivable collections, and work with your clients. The constant communication will remind them that payment is still expected, and by establishing a good relationship, they will be happier with your services and give your invoices a higher priority in the future.
2. Be Creative with Payments
People tend to choose the path of least resistance. If you make it difficult to pay invoices, clients might opt to ignore them. Offer your clients different payment options so that they can choose the one that is easiest for them, which will greatly increase the likelihood of getting paid.
- Offer payment plans – There are times you may have a client that is struggling to pay on time. Present these clients with a payment plan that fits their needs to show that you care and want to help. It will benefit your relationship and make it easier for them to pay. Set up a plan on paper and have both parties sign it to avoid any confusion in the future.
- Offer multiple payment methods– By making payment easy and offering your clients’ preferred method, you can improve A/R collections. The more payment methods you accept, the more likely clients will pay invoices on time.
3. Automate Accounts Receivable Collections
Accounts receivable management takes time and effort, which is exactly why many companies struggle to keep up with it. By automating your A/R processes, you can improve your accounts receivable collection efforts with automatic invoicing, intuitive billing systems, and comprehensive dashboards and reports.
- Get your receivables faster – Personalized and friendly payment reminders can greatly increase the chances of getting paid on time. By setting up automated reminders, you can notify your clients, before and during the payment due date, with the exact amount they owe. Being proactive with collections is the best way to get paid.
- Save on labor – Automating your accounts receivable collection processes will eliminate the busywork associated with accounts receivable. This will save money and time on labor costs. You can then use that extra manpower elsewhere within your company.
- Improve your business – Data and dashboards can help you identify patterns to better optimize A/R collections processes. Then, you can better utilize your resources to continue improving business.
If you are looking for a better way to manage accounts receivables and improve collections, Gaviti can help. With automated A/R solutions, you can get paid faster, reduce DSO, and improve collections. Accelerate your cash flow and try Gaviti today.