3 Big Tips to Help Manage Receivables
Managing receivables is one of the biggest functions in any business. After all, receivables come after sales, and the revenue generated keeps the lights on, the employees paid, and operations running smoothly so the business can grow successfully. To this end, there are a few tricks to help ensure regular payments from customers and to streamline the accounting process in order to make managing receivables easier and more efficient.
1. Get a Partial Payment
Invoices have aging periods to allow time for the delivery of goods and services, and for customers to budget appropriately to pay the cost of those deliverables. However, waiting until the end of the aging period can put a big strain on a company’s cash flow. The business still needs to pay regular expenses, and if customers are sitting on payments, then funds are not being replenished. Asking for a down payment, or even an additional payment when the order is partially completed is not unreasonable. This gives the business some extra working capital, and customers who have put down an initial payments on receivables are more likely to pay off the balance in a timely manner.
2. Charge Late Fees
No one wants to pay more than they have to, and no one wants to risk their credit score over a single purchase. By stating upfront that there are extra fees for late payments on receivables, and reinforcing that in print on an invoice, customers will pay on or ahead of schedule. Business owners should not feel any apprehension about instituting late fees. It is a standard practice, and if customers do not pay on time, then the fees help to recoup revenue that went towards business expenses while waiting for payment.
3. Monetize the Receivables
Perhaps one of the most efficient ways to ensure fast payment on customer invoices is to monetize receivables. By partnering with a commercial finance company, you can sell your unpaid customer invoices for immediate working capital (the turnaround on submitted invoices is usually 24 hours), minus a small processing fee. This not only consolidates your payments into one source, but the responsibility of tracking aging periods and getting payment from customers falls on the financing company – which alleviates a lot of headaches in the accounting process. Monetizing receivables is something both new and small businesses do to ensure a steady cash flow, and it is also used by larger corporations to streamline accounting.
By implementing any of the above tips, your business will be able to make manage receivables more efficiently, and improve your cash flow.