How to Develop the Perfect Accounts Receivable Policy

Maybe you have noticed lately that your cash flow has gotten slow, or you have just realized that your collections team could use some help. Sometimes people immediately turn to desperate measures, like blaming the customers and demanding payment. Usually, however, the best way you can remedy your accounts receivable problem is by looking at your own accounts receivable policy. Do you have one in place? Some companies don’t and it leads to inconsistencies and less customers paying on time. Here are some tips for setting up an accounts receivable policy.

  1. Disputes
    Your collectors should be starting with the largest invoice first when dealing with disputes. You should segregate the invoices using reason codes. By using a different code for each reason, such as freight charges, missing purchase order information, wrong person, incorrect product received or product damaged, you can easily track how often these disputes are occurring. If the same keep popping up, you may need to address a problem in a different department.
  2. New Customers
    Taking on new customers is an important area to have a firm accounts receivable policy. Make sure that every new customer is filling out a credit application, to be sure that you aren’t extending credit to someone who simply won’t pay. Have someone on the collection team be in charge of each new customer to be sure every policy is explained, from possibly overdue payment fees to where the payment should be sent.
  3. Large Invoices
    Large invoices have the greatest risk, but can also give you the greatest reward. You need to watch over the larger invoices carefully. Have an accounts receivable policy in place where these customers are reminded to pay more frequently and that a follow up call is made after the invoice is sent to ensure it was received.
  4. Past Due Emails
    The longer an invoice goes without being paid, the less likely you will get paid for the full amount, which is why an accounts receivable policy for these emails are so important. Make sure your team has a set number of days once an invoice goes unpaid that they must send a past due email by. Have an email template made up that includes your policy on late payments and include the original invoice.

These are just a few of the important areas that you should have an accounts receivable policy in place. There are many other situations that you can create a system that the credit team needs to follow. If you have a set procedures for a situation where someone pays late, you are more likely to receive payment quicker. Using an accounts receivable software can make these procedures a lot easier because a credit team can follow workflows, prompting them on what steps they need to take next. Further, it automates much of the work for you be sending invoices and attaching important documents.

Related Posts