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Get Paid Faster – Tips on Quick Accounts Receivable Collections

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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How To Choose a Corporate Year End

Is your choice of Corporate Year-End timing critical?

You’ve incorporated… did you know that you can CHOOSE when your year-end can be?  It’s true! You do not have to have a December 31 year-end. This is a very common misconception.

Deadlines to keep in mind:

For most small to medium businesses in Canada:

  • Your corporate taxes are due within 3 months of your year-end.
  • You need to file your corporate tax return within 6 months of your year-end.
  • T4s and T5s for any wages and dividends paid must be filed by February 28.

Imagine how busy the professional accountants would during the months of January and February!

The virtues of a non-December 31 year-end:

  1. Your accountant will have more time/energies to devote to your year-end.

This is a sad, but true fact.  Many professional accountants are crazy busy during January through to the end of April.  You’re likely going to get slightly better customer service during slower times of the year.

  1. Opportunities for tax planning and deferrals.

If you’ve got a December 31 year-end, this means that your personal tax year-end equals your corporate year-end.  Any funds drawn for your corporation MUST be reported on your personal taxes in that year (unless repayment plans are in place). These numbers must be reported as part of your tax return when you file your corporate tax returns.

Any other year-end date allows for so much more flexibility with respect to when these funds were drawn and repaid.

How to choose a year-end:

  1. Approximately 12 months after you incorporate.

This option gives you the most bang for your accounting dollar with 12 months included in your corporate tax return filing.  For example, you incorporate on April 17.

Without other considerations, a March 31 year-end would be a reasonable choice.  Why would you have financial statements and a corporate tax return prepared for December 31 when you can postpone it until March 31?

Do you have questions on how to get started? Let’s get connected!

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Why Enlist an Accountant from Day One

New Entrepreneur Check List:

  • Brilliant idea?  Check.
  • Endless passion?  Check.
  • Supernatural ambition?  Check.
  • Nerves of steel?  Check.
  • A clear vision of success?  Check.
  • An accountant?  …. WHAT? WHY? …I haven’t made any money yet.  Why do I need to worry about accounting?

That is a fantastic question.

You don’t know what you don’t know.  When you don’t know what you don’t know, it’s easy to overthink the unknown.

Does it make sense to incorporate?  How do I incorporate? Do I need to register for GST?  Payroll vs Dividends? What can I deduct? How do I track my information?  When do corporate taxes need to be filed? Paid? How much to save for tax and GST?  Who should own shares in the corporation?

At this point, new entrepreneurs will generally do one of the following:

  1. Spend countless hours online trying to find information.
    There are endless sources of information online. Is it true?  Is it understandable? Is it relevant? How much time was spent researching stuff that you really don’t care about?
  2. Procrastinate.
    It’s easy to become overwhelmed at the thought of all those questions and vow to deal with it soon… very soon… next month for sure. Ignoring Canada Revenue Agency and it’s various filing requirements rarely ends well.  Consequences can range from penalties and interest to CRA seizing your bank accounts. It’s difficult to run a business when CRA strips your bank account of every penny each time you make a deposit.
  3. Ask friends and relatives. I can’t tell you how many times I’ve heard my clients say, “But my neighbour said I could claim all of my personal grooming expense in my business because I have to look presentable and presentable”.Or “My brother in law says he claims______________ ***insert ridiculous personal expenses here***_______”   All is well and good until there is an audit. At this point, you’re dead in the water.

Bringing an accountant from day 1 can:

Save you time.

  • More time to focus on your business—and less time is taken away from your family and loved ones.

Save Money.

  • Procrastination can be extremely expensive in late penalties
  • Also, save by coming up with a tax plan custom to YOUR business and personal situation
  • Perhaps there are certain elections you’d qualify for… or grants

Gain knowledge.

  •  An accountant can offer a bird’s eye view on your business idea.  What haven’t you thought about? Insurance? Financing? Are you partnering up with someone without a unanimous shareholder agreement?  What sorts of things can you deduct as it pertains to YOUR industry?

Assist in creating a strategic plan.  

  • Should you incorporate?  If incorporation is a logical choice, when should you incorporate?  Perhaps you’d be better off operating as a proprietor for a year or two first.  What would be an appropriate corporate fiscal year end date? People assume that December 31 is the obvious choice for a fiscal year-end.  The reality is, you can choose any date for a year-end and a non-December year end allows for so much more flexibility in tax planning.
  • When are the various government filings due?  Avoid surprises and prepare in advance.
  • How are you going to maintain your records?  Can you manage the documents yourself?  What tools/software and applications are available?  Do you need to hire a bookkeeper? What documents should be kept and for how long?  What are your options for the organization?
  • How are you going to pay yourself?  How much do you need to set aside for tax?
  • How are you going to manage your cash flow?  An accountant can assist with some strategies to make sure there is money in the bank.

Gain Peace of Mind:  – carry on your first year KNOWING that you’ve got a plan of action.

If you have questions about getting started, comment below or contact us.

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