Each industry has a unique accounts receivable days. Some industries are lucky and get paid in the esteemed 30-45 day period, while others are scrambling to receive in 90 days. Of all the industries, 10 have been identified by Sageworks as those that wait the longest to get paid.
For some companies, getting paid later than 45 days has become the norm, and have found it to be manageable. If you’re in any of these industries, however, and find your average wait time is longer, then it may be time to change tactics.
- Management of Companies and Enterprises: 125.1
- Oil and Gas Extraction: 110.9
- Technical and Trade Schools: 109.3
- Automotive Equipment and Leasing: 104.4
- Outpatient Care Centers: 99
- Mining: 90.8
- Architectural or Engineering Services: 74.4
- Scientific Research and Development: 70.8
- Building Finishing Contractors: 67.5
- Civil Engineering Contractors: 66.5
If your accounts receivable days for your company is longer than the average, there are some simple steps to take to increase and speed up cash flow.
Be Wary of Extending Credit
Although extending credit can help to create business, be wary of who you’re extending it to. It is okay to conduct a credit check on a business to ensure that they will pay you. Depending on the customer and their credit, you can come up with different credit terms
Make sure that every detail about the project or product is recorded accurately. This will help to cut down on disputes. Send the invoice to the correct contact, one of the main reasons invoices go unpaid is because they were never received.
Apply Late Fees
Make this very clear when you agree with a client on a job. Decide on a length of time the client has to pay before you start charging a late fee. Customer will take the need to pay more seriously and no longer put you at the bottom of bill pile.
Monitor Late Payers
There are always a few clients who tend to pay late every single time. Flag these customers and monitor them more closely. Run through your list of customers to see who is doing this the most often.
It is also helpful to monitor your own industry. If there are other companies that are receiving on payments quicker, they’re probably enacting policies to get there. They are also probably gaining more ground because they have the cash flow to do it.
Sometimes the accounts receivable days of an industry are just the name or the game and normal. However, enacting simple steps to get paid faster will put you ahead of everyone else.