Tips for reducing account receivables
Many businesses struggle with finding a way to deal with their account receivables. Business owners often find that they have a great deal of money that is tied up while they wait for their customers to pay. This can not only be frustrating but also seriously affect your cash flow. The good news is that there are things that you can do that will help to speed up payment from your customers and get your cash flow in a healthy place. The key to making these tips be successful is to do them on a regular basis. When you have a procedure in place you will be more likely to able to reduce the amount of late accounts. Here are some tips for reducing account receivables-
- Send out the bill right away-You not only want to bill your customers right away but you should also be clear on what your billing really means. Your invoice should let your customers know in bold lettering exactly what your payment terms are and what the penalties will be for late payment. Keep in mind that the longer you wait to send out the bill the longer it will take to get payment from your customers.
- Don't extend credit to new customers-Many business owners make the mistake of thinking that they have to extend credit to all of their customers or they won't get business. This is not necessarily true. Your first time customers most likely won't be expecting to be granted credit. You will need to make sure that you are dealing with customers who will pay their bill on time before you extend them credit. It is also crucial that you do a thorough background check on any customer who does apply for credit. You want to make sure that you are only extending credit to the most credit worthy of your customers.
- Offer multiple payment options-Studies show that businesses that offer multiple payment options tend to have customers that pay their bills more promptly. If you can you need to offer your customers several different ways to pay their bills. Accepting cash, multiple credit cards, and online payment forms will give your customers more options to pay their bill on time and in full. It can also be helpful to check with your customers periodically to make sure that your business is accepting their preferred method of payment. This can be part of a regular customer feedback survey.
- Ask for deposits-It has also been shown that when businesses ask for deposits on orders they tend to receive payment in full faster then if they don't. If your customers know that they already have cash tied up in an order with your business they are far more likely to pay their balance in order to get it. This method of reducing accounts receivables also has another benefit. In addition, to getting the cash that you need for the order you can also use the deposit money to offset the cost of producing whatever it is that you sell.
- Follow up on late accounts-The reality of accounts receivables is this-if your customers know that it is unlikely that you will pursue payment then they will take their time paying you. It is important that if you have accounts that are late that you set up a process that helps you begin collections and get the money that you are owed. This sends a message to all of your customers that you expect prompt and timely payments for their orders which can go a long way toward reducing accounts receivables.