How to Manage the Cost of Credit

Calculating and monitoring your lines of credit to customers can make a huge difference in your accounts receivable. For every invoice that you send out to customers, there is a cost associated. Are your customers paying you on time or are they significantly behind? If a majority are behind, extending credit could actually be hurting your business. Below we will cover the basics on how to calculate the cost of credit and share accounts receivable best practices to help you decrease and control the cost of credit moving forward.

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Invoice Collection Letter Tips, Samples, and Templates

Also known as a demand letter, dunning letter, or past due letter, a collection letter is an integral part of your invoice collection process. The collection letter usually comes into play after the customer is already past due and after you have made a few attempts to contact the customer via phone. Sending these letters makes a huge difference in being able to collect on the invoice as soon as possible, so making them effective is crucial. When it comes to writing an invoice collection letter, its success or failure hinges on both letter messaging and delivery timing.
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10 Industries Known for Slow Accounts Receivable Collection

Sageworks, a financial information company, recently conducted a financial statement analysis and found that of the many industries in which business operate, there are ten that typically have a harder time with rapid accounts receivable collection than others. Read below to learn which industries have historically high accounts receivable days and what exactly that means for businesses operating within them.
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How to Create A Customer Credit Application Form

Credit Application FormA credit application is critical to assessing and managing business risk and to identify those customers who you may not want to extend credit to. Despite this, most companies either do not use a credit application form or they do not use them consistently enough. Often times this is a direct result of not knowing what to include in the form in order for it to be effective. A more comprehensive application will give you a better idea of where the customer stands with credit worthiness and gives you more confidence in making the right decision.
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The 6 Commandments of Accounts Receivable Emails

Research from UCLA found that words only convey 7% of the message you are trying to send, vocal elements convey 38% and nonverbal elements convey the remaining 55% which means your accounts receivable email strategy needs to be buttoned up pretty tight if you want them to help you get paid on time.

Below are a handful of accounts receivable commandments that anyone writing collections emails need to know.

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4 Accounts Receivable Management Secrets of the Successful CFO

Managing cash inflow and outflow is one of the most important aspects of a finance executive’s job but it’s far from easy, especially when it comes to accounts receivable management. You can set terms and send invoices, but managing the process and policy behind getting paid on time is an entirely different story. Cash flow is delicate and it’s a vicious circle- you know when you need to cover an expense, but if you’re not getting paid on time, you may not have the cash you need to take care of it. So what can you do to improve collection performance and gain more control over cash flow? Below are a few of the most effective ways to get a handle on accounts receivable management and some additional resources to help you find the right balance of cash in and cash out.
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Overcoming Collection Email Hurdles: Part 4

 

Actually getting the customer to pay is one of the greatest hurdles to overcome in collection emails. You can lead them down the right path but there is no way to force them to open their wallet and pay on the invoice. The only way to be successful is to follow the best practices and give them all the resources they need to make payment immediately.

So far we’ve discussed how to ensure the email is in their inbox, how to get them to open it, how to get them to read it, and now is the moment of truth on whether you can get them to pay.  Continue reading

Overcoming Collection Email Hurdles: Part 3

It may not seem like a big deal what you write when you send a collection email, but it could mean the difference between a customer paying or not paying. Yes, you’ve gotten it in their inbox and at least they’ve opened it, but if they haven’t read the email then they won’t know to pay. Issues with getting customers to read the email all start with how wordy you have been and what type of tone you take. Below, you can find some tips on how to ensure your customers are reading the email all the way through.
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Overcoming Collection Email Hurdles: Part 2

Although email is one of the most efficient ways to send invoices to your customers and get them to pay on time, it does come with its challenges. In our last blog post, we discussed how emails can get stuck in Spam and junk folders. The first hurdle was simply ensuring the email got into your customer’s inbox. In this blog post, we’ll be discussing the second hurdle when sending invoices via email: getting your customer to open it.
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Overcoming Collection Email Hurdles: Part 1

For anyone involved in the process of collecting invoices from customers, sending out emails about overdue payments is an everyday occurrence but it’s not something that should be quickly completed, crossed off the to-do list, and forgotten. Being successful with invoice collection emails is much harder than you might think and there is a big difference between writing a collection email and writing a collection email that actually gets results. In order for an invoice collection email to be successful it has to overcome four major hurdles:
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How to Use Cash Flow Forecasting for Accounts Receivable

You know how much cash you have on hand right now, but what about next week or next quarter? Having insight into your cash flow is critical to making better decisions and heading off potential problems before they happen; but answering those questions is not easy to do. For most companies, forecasting accounts receivable is their most difficult forecasting task because it’s very difficult to predict when your customers will pay you. You may know when payment is due, but not all customers pay on time, right? Consider the strategies below to help you increase the accuracy of forecasting accounts receivable to gain better insight into cash flow. Continue reading

How to Determine Customer Credit Terms

If you’re in the accounts receivable department of a B2B business, you’re most likely dealing with extending credit terms to customers. These aren’t simply the click of a button purchases, but the customer owes payments over an extended period of time and relationship between you and the customer is created in order to continually receive payment on time. Determining which potential customers are risky and which are credit worthy can make or break you company’s cash flow.
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How to Find a Balance When Writing Collection Letters

When you send a collection letter you have two primary goals; to get paid and to maintain a positive relationship with your customer. It may seem easy, but it’s harder than you might think to send a collection letter that is effective in both respects. Many times, a company will send a letter that is either too friendly and the customer shrugs it off, or too firm and the customer may not want to work with you in the future due to your customer service.  Here are a few suggestions to help you find the perfect balance between polite and firm and write a collection letter that will help you get paid faster.
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The Benefits of an Accounts Receivable Dashboard

If you ask a majority of CFOs about their biggest concerns, most of them will tell you that increasing cash flow is a high priority. In order to succeed in this, you have to keep an eye on the credit and collections department. However, many companies do not have the means or data to find out where they currently stand. Especially when these companies are using manual processes and spreadsheets, this data is often hidden and would take hours to retrieve.
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Who Should You Have On Your Accounts Receivable Team?

It’s not easy to know when it is time to hire new employees or create new positions as your company grows, especially when it comes to your accounting department. It’s relatively easy to identify when to hire new salesmen and easy to justify that hire because with them, you will be able to close more deals and make more money, right? Making the same decision about accounting functions like collecting accounts receivable is a little bit more difficult, but just as important.

There is no real formula for figuring out when you should turn your part-time position into a full-time one, or how many people you should have dedicated to collecting accounts receivable, but over the years, we’ve come up with a few general rules to help you make this decision for yourself based on your organization’s specific needs. Continue reading