Do you wish you could get paid for your services more quickly and with less effort?
It is often easier to make the sale than it is to actually collect the amount due from your customer. Today, successful firms understand that the collections process does not start when an account becomes past due. There are several upstream processes that when aligned properly can significantly improve your ability to get paid more quickly and completely. The connection between the people and systems that sell, bill and collect are not always optimized.
The first place to start is with the credit terms that you have established for your business. Do they meet the needs of your customers while still providing an adequate flow of cash into your business? How long does it take from the time you provide your product or service to your customer before the bill is cut and the funds are in your account? Reducing the cycle time from delivery to invoicing to collection is key to ensuring the optimal level of liquidity within your business.
The process for determining when an invoice should be cut and then how that invoice flows through approvals and gets delivered adds time before the customer even sees the amount that is due. Once the customer receives the invoice, they make choices about when to pay based on their schedule and what best suits their needs. The options available to them to actually make payment is another variable that can determine how easy and convenient it is for the customer to respond in a timely manner. Considering all these factors and streamlining your invoicing and payment processes can make all the difference in how quickly you receive payment.
Statistics show that the longer an account remains unpaid, the lower the probability of collection. There are key metrics that should be reviewed on a regular basis to see how the process is running and when action needs to be taken. To help ensure you get paid as quickly as possible, your policies, procedures and systems need to be clear and consistent, yet be flexible for when circumstances require exceptions. And, of course, the process should be as automated as possible to minimize the expense you incur on this function.
Reviewing your policies, processes and systems to see where the bottlenecks exist and how to eliminate them will help to improve productivity. Improvement in your accounts receivable process will free up the cash that you have earned so you can reinvest in your future.