Unlock Working Capital with Receivables Collection Best Practices

Working Capital Management SoftwareDo you have easy access to the working capital you need for continued business success and future growth? Most companies don’t, especially when it comes to accessing the cash locked up in accounts receivable, a problem plaguing businesses across various industries. Collecting the money owed to you is not easy, but it’s likely one of your largest assets and biggest source for the working capital, so it’s important to get a handle on it.

While improving accounts receivable is not something that can be done overnight, there are some very simple best practices you can follow to turn things around in your receivables department one step at a time to reduce outstanding invoices and steadily improve working capital and working capital management. Here are a few of the simple and easy ways you can get started:

Remove payment barriers. How easy (or difficult) are you making it for your customers to pay you on time? Some of the most common barriers to payment include:

  • Delayed invoice delivery- the faster your customer has the invoice, the faster they can pay you. How long does it take for you to create and send an invoice? Have you considered sending invoices electronically or through and online payment portal?
  • Incorrect invoices- this will require your customer to get a hold of you to correct the mistake prior to being able to pay it.
  • Paper-based payment processes- do your customers need to cut a check and send it in the mail? This sounds like a pretty simple task, but any extra step your customer needs to take to complete payment will slow things down. Further, you will need to wait a few days on each end as the invoice works its way through the postal service.
  • Giving your customers the ability to make payments over the phone via a credit card will speed things up, but it still requires your customer to stop everything to make that call; which again sounds simple, but it requires them to make this call during business hours and could result in a frustrating game of phone tag for both parties. The easiest thing to do? Make it possible for them to pay online 24/7 via a secure online payment portal. Certain accounts receivable management systems will provide you with this portal as well as the capability to email customers a secure payment link that will take them directly from your email to their invoices online where they can pay via credit card or ACH.
  • Incorrect invoice format and content- Some customers may require a particular format or specific information on the invoice before it can be processes for payment, this is especially true of your larger customers. Be sure to make up an invoice template for these customers so you can quickly create an invoice in their preferred format so they can pay it upon receipt, without having to contact you for adjustments or make adjustments of their own.

 Dig deeper: invoice creation and delivery best practices

Increase collector efficiency: Many companies manage credit collection with disconnected systems, relying heavily on aging reports and static spreadsheets to manage A/R, an area that is constantly changing as invoices age, get paid, etc. This strategy means hours spent updating spreadsheets and digging through aging reports when collectors could be spending their time on more impactful activities like calling customers to follow up on invoices.

Automated working capital management software, such as accounts receivable automation, can solve this problem. The system will tell collectors exactly what to do and when to do it to be as effective as possible while automatically sending reminders and notifications as due dates approach and pass; it will record payment and update the account; it can be set up to send a “thank you” note once the payment has been received, and much more. For each of those automated communications, you can set the rules that define when they are sent to specific customers and utilize customizable templates to support your brand and strategy. Learn more here.

Provide centralized information:If you use collection strategies like those mentioned above that usually means islands of data and multiple versions of spreadsheets spread out across your collectors; and that means not everyone will have access to the same customer information. Each collector will likely have important invoice notes, account information, and other documentation saved off on their desktop or an intranet where others may not be able to access it. What happens if that person is out of the office and a customer calls in about an invoice? Other employees will need to drop what they are doing and spend even more time trying to find information and play catch-up which can be frustrating for them and the customer.

Consolidating all of this information in a single A/R management system makes handling situations like this fast and easy so your team can work, well…as a team, to better serve your customers and work toward your goal of getting paid on time.

Enable consistent communication: One of the biggest obstacles for companies looking to reduce their outstanding A/R is finding the time to consistently and systematically communicate with customers about invoices. Often times, collectors are not even following up with customers until after the invoice is already past due! This reactive approach is likely the biggest cause for concern, but it’s also the hardest one to overcome, unless you are using the right tools and templates.

Dig Deeper: How to Develop Killer A/R Collection Letters, Call Scripts, and Email Templates

There is more where that came from, download the white paper below to learn even more receivables collection best practices to help you rid yourself of the late invoices that are blocking you from accessing the working capital you need to grow your business. Click below to get your copy and start  getting paid faster.

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