RMLLP Blog

Getting paid should be easy.

Many entrepreneurs struggle with cash flow and wish they had more money in the bank. One of the most significant keys maintaining a healthy cash balance is collecting accounts receivable in a timely manner.

Here are some tips and tricks to ensure you’re collecting your accounts receivables as fast as possible.

Stay on top of your invoicing.

Picture the entrepreneur that is too busy doing the work to invoice his customer. Most people would agree that there is very little point to working in your business if you never receive any money. Hire staff/contractors to help you with this if you are too busy.

    • Invoice for work completed as soon as possible. If your customer typically takes 30 days to pay your invoice, the extra time that the paper sits on your desk equals added extra days before that money lands in your bank account.
    • After delivery of the invoice, consider following up with your customer to ensure that they have received your invoice as well as any other documents and information required for payment. This may include PO numbers, proof of delivery, etc. Missing information can add days/weeks or more to your collection time.
    • Consider automating your internal processes to save time in paper processing.
    • Ensure that your staff are aware that invoicing is a priority and that you have the manpower to get the task done on time.

Call and ask for the money.

Don’t be too busy to remember to call and collect from your customers. The money doesn’t land in your bank account any faster by sitting, hoping and waiting.

    • As time passes, consider simply picking up the phone and calling the customer. If your customer normally pays within 30 days and its day 35. Perhaps a gentle reminder is all that they need. Perhaps there are other circumstances.
    • It’s important that your customer be aware that they have bills to pay. Be the squeaky wheel. If they are in a tight cash flow position, when there is cash available for payments, you want your invoice to be on the top of the list.
    • Often calling and collecting money ends up on the bottom of the priority list for busy staff. Ensure that staff know that collection activities are a priority and consider hiring help as required.

Offer quick and easy payment options.

    • Do you accept electronic payments? E-transfers? Credit cards? While the merchant fees on credit card payments can cut into your profit, so can paying interest on your operating line of credit… or not being paid at all. There are many mobile debit and credit card processing options. If your customer is the general public, strongly consider some of these immediate payment alternatives.
    • Electronic and card payments can eliminate the old “the check is in the mail” excuse. Mailing payment can add an additional week to your collection time. Mention your electronic payment options so that your customer can also save money on postage

Offer discounts on quick payments or charge interest.

    • Does it make sense to offer your customers a few percent off of their bill if they pay immediately or within 15 days?
    • Alternatively, consider charging interest on late payments. Often people will delay paying you simply because there is no consequence to not paying you.

Evaluate your policies for granting credit.

    • Who are you offering goods and services to without knowing of their ability to pay?
    • Do your customers have to fill out a credit application?
    • Do you obtain their credit history?
    • Do you have internal controls that prevent sales staff to extend additional credit when previous invoices have not been paid?
    • Consider obtaining a retainer or deposit.

Know your legal rights.

    • If your customer is delaying payment, can you place a lien on a property? Make sure you are aware of your options and any applicable deadlines to register such liens.
    • What are your options with small claims court?
    • What are your rights to collect on invoices outstanding for over a year or two?
    • Develop a relationship with a good collection agent to assist with difficult cases.

Stay current on your record keeping.

You don’t know what you don’t know. Get meaningful financial reporting on a timely basis.

    • Current financial records will indicate exactly who still owes you money. Keep on top of bookkeeping and reconciling your bank account. Review your accounts receivable listing regularly.
    • Become immediately aware of any NSF payments by your customers.
    • If you take your box of records to a bookkeeper quarterly or annually, you may not realize that your customers invoice over 60 days old. Perhaps monthly bookkeeping options would be better for your operations.
    • Even with very simple operations with very few customers, it’s easy to forget that an invoice is outstanding.

Need assistance with bookkeeping or automating your invoicing processes? Send me an email angela@rmllp.ca.

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