When Cash Flow is King – How to Minimize Your Accounts Receivable

From marketing to purchasing, account receivables affect all aspects of an organization. Every accounting firm strives to make running its business easier. But for many of them, a big roadblock that dampens every effort they make to improve is late payments.

1 in 5 businesses say that late payments continue to post serious threats to business owners and entrepreneurs.

If you don’t want to let these pending accounts receivable derail all the hard work you have done, take a look at some of the ideas mentioned below.

1. Be Flexible in Repayment Options

Late payment scenarios are common, especially for small business owners. There are, however, ways to mitigate these issues if you give your customers flexible repayment options.

Automatic Recurring Payments and Authorization

One way to get paid faster is to provide the option of automatic recurring payment schedules. Whether a customer intends to pay from their bank account or a credit card, valid authorization should be obtained prior to the first scheduled payment.

This authorization can be carried out in various ways, including both physically signing a form and authorizing electronically. Once the authorization is complete, you can then set up a schedule for payment.

Some consumers may be hesitant to sign up for automatic scheduled payments if they feel like the dates are set in stone and there is no flexibility offered. In this case, offer the customers a certain degree of flexibility.

For example, you might adjust the payment date for single or multiple payments. Or you can switch the bank account or credit card on a schedule.   

Introduce and Accept More Payment Plans and Payment Methods

The more payment methods and payment plans you introduce and accept, the better. Your customers likely have a preferred payment method. As new modes of payment are continually adopted, it is good to stay on top of them and give your customers increasingly convenient options to pay.

Most customers also don't like going through long-drawn-out processes. To make things easier, you can provide direct payment links on your business website.

Additionally, give your customers a variety of payment plans to choose from. This gives them an opportunity to choose what suits their budget best. As a result, they will be more likely to complete payments on time.

Secure a Signature

Establish a requirement for customers to sign an agreement or contract before products or services are provided to them. This is a key component in an effective accounts receivable process and one that should not be overlooked.

Don’t let things live only in email. Instead, ensure that all contracts are signed by making them easily accessible by setting your system up for e-signatures and scans.

2. Time It Right

They say “timing is everything” and they are right. Late payments come with quite a few consequences for businesses. A good practice to avoid that from happening is to schedule payments on days that coincide with the client’s pay schedule.

This will significantly improve your chances of minimizing your accounts receivable as the customer is more likely to pay when they have money in their hand.

Moreover, you are less likely to be hit with the dreaded “Payment declined” or “Unable to complete transaction” due to low balance.

3. Automate Payment Reminders

It’s your job to make accounts receivable process easier and more efficient. One of the best ways to do that is by setting up automatic payment reminders through emails and text messages.

Automating your processes would eventually lead to less time and resources spent on menial and tedious­– yet necessary – collection tasks. These tasks result in unnecessary delays when carried out manually.  

Automating Emails

Setting up automated emails will help your clients sort and settle their invoices before they are overdue. They will also create less work for your accounts receivable team and simplify the entire process for both sides.

A few ways you can create automated A/R emails:

• Build reusable email templates. You can have separate email templates for different purposes, such as payment reminders, collection payments, etc. To take it one step further, you can build reusable templates categorized by different scenarios, such as 30-day, or 90-day email reminders.

• Set Up Emails to Trigger at Select Times. Automating emails to trigger at certain times could facilitate faster collection. It would also help keep your business top-of-mind for the customer.

Automating Texts

Similar to emails, you should always automate text messages. You can compose text templates with personalization tags (name of the customer) and calls to action (CTA).

After composing your personalized texts, you can then schedule them to be sent out at specific times.

You can also use tools, such as Twilio and SimpleTexting, to schedule and send out invoice texts to your clients.

There are also some excellent account software solutions, such as QuickBooks Online to help you automate your accounts receivables collection and do much more. 

Thanks to automation, you are able to send electronic invoices. Not only does this keep the record straight and transparent, but it also eliminates any delays that may occur as a result of postal mail.

These automation features also reduce the time spent chasing clients through multiple calls, texts, and emails to get paid. You are also able to reach your customers instantly and gain visibility into your cash flow by tracking incoming payments.

Final Thoughts

Optimizing your company’s accounts receivable process may seem overwhelming at first. But, remember that you don’t need to make radical changes all at once. It is, however, important to make some changes as soon as possible.

Following the tips above will help you make significant improvements in your cash flows, and consequently, your business’s bottom line. Whether you like making swift changes or going the more slower route, there is no better time to start optimizing your accounts receivable cadence than now.