Once you’ve completed the first two steps to getting paid faster in 2016, which we discussed in the first half of this article, you should have enough information to move on and begin formulating a plan for the coming year. That of course is much easier said than done as there are many aspects that go into making a plan and policy for improved accounts receivable performance; but here are a few tips to get you headed in the right direction.
If you read the first half of this article (and did your homework) you should have a list of your current accounts receivable metrics and some insight into how you measure up to your peers. Use this list and information to set goals for the coming year. Some example of these goals include:
- To have a collection effectiveness index of X%
- Attain an average days sales outstanding of X days
- Reduce bad debt write-offs of X%
- Or others
Ok so now you have your goals, but to get there you’re going to need a plan.
In the previous section of this article we talked a lot about identifying the current strengths and weaknesses within your collections process. You should have made a list of each. What were yours?
Maybe you found that your biggest weakness was being re-active instead of proactive; only calling customers after they’d gone beyond terms instead of before the due date to remind them. Maybe it is a part of your plan in 2016 to start being more proactive. To do that, you must first get to the root of the problem; what smaller factors are contributing to your large issue of reactive collections? It could be one of many things, for example:
- You don’t have enough staff to keep up with making all of those calls.
- You’re too busy updating spreadsheets to call customers unless they’re overdue.
- You don’t have insight into due dates.
Not having enough time, limited budgets, excessive manual processes, and too few staff members can breed ineffective collections and are often a part of the problem. Accounts receivable automation can help you overcome them.
Sticking with our example of reactive collections, automating some of those manual processes can finally give you the time and the information you need to start calling customers before the due date; a proven way to increase on-time collection and recognized as one of the most effective accounts receivable best practices.
This is just one example of how to use the information you’ve uncovered and lists you’ve made to create an effective accounts receivable policy and plan. We’ve put together a much more in-depth guide which you can access and use by clicking the button below.