While good accounts receivable looks great on your general ledger, it doesn’t do much when it’s held up by billing disputes. Late payments and disputes can significantly affect your access to working capital, and it only worsens with time. The longer it takes for those invoices to get paid, the more unlikely it is that they will ever be paid. For example, if you allow an invoice to age 90 days, you’ll be fortunate to gather only 74% of the funds to be paid, at 60 days you’re probably only going to collect just 30%, and you can just forget about getting paid if it’s more than 12 months late, because you’re only going to collect on (10%) of those receipts.
Bad accounts receivable practices can be very damaging, consider this:
Organizations across industries write-off around 4% of credit sales every year; that is $400,000 every year for a $10 million organization. If they were to reduce bad debt write-offs by 20% (a reality for organizations who use accounts receivable best practices) they would save $80,000 per year – each and every year! From that point an organization could save considerably more by eliminating paper and postage costs with electronic invoicing.
Besides just the financial impediments of invoice disputes, shouldn’t something be said about your customer relationships? It is safe to say that they are questioning invoices or deferring payment because they are upset with the product or service? That is infrequently the case. As a general rule, late payments and disputes are the result of an issue on the invoice, an authoritative mistake, or they were not reminded to pay. If that’s is the situation, your clients will be confused with your invoicing and collection practices. Your accounts receivable office is your clients last interaction with your business, you wouldn’t want to mess up the chance for grow business because of poor accounts receivable management.
Decreasing invoice disputes and optimizing cash flow starts at the same place, your records receivable management techniques. By improving you’re accounts receivable processes you can reduce invoice disputes, begin collecting 100% of the cash owed to you, and see your accounts receivable having a positive effect some place other than on paper. Click here to learn about proven strategies to get rid of disputes.