Managing Accounts Receivable? Don't Make These 5 Mistakes
Accounts receivable is essential to your business. It can also be a tricky part of your business to manage. In fact, its management can make or break your business! What exactly is accounts receivable? When money comes into your company, the client pays it to accounts receivable. This means revenue for your business, you, and any employees you may have. Long story short, accounts receivable is the cash flow of your business.
You'll find many articles that tell you what to do and a few that tell you what not to do. Read the following article so you won't make these costly mistakes!
When you don't communicate with your clients, neither of you can know what the other wants or needs. If you don't communicate, your client can't possibly know what you are thinking or wanting. This shows us the importance of keeping the lines of communication open. What would happen if you client needed to let you know a payment might be late or you needed to let your client know you'd be out of town on a day when they might want to pay. Without a line of communication left open, both of you would be in the dark. Keep communication open for both your sakes!
Allowing All Clients to Access Credit
Providing all clients with access to credit with your company is a recipe for disaster. Allowing all of your potential clients to apply for credit with your business may seem like a good idea. It might boost your sales! However, it can prove disastrous. What happens when these clients can't pay? You lose revenue. On top of that, you could lose hours of your time trying to collect debts that may never receive a check for. This time is precious and could be used furthering your business, putting you further behind. Don't do this to yourself.
Make your clients fill out an application for credit. Run a credit check on all new clients. Run a credit check on clients who haven't used their credit in a while. Measure your risk. To learn more about credit management, check out our series on creating a sound credit policy. Not sure you can take on the serious responsibility to setting proper credit lines? Clients ARM can help. Schedule your free consultation now.
Not Providing Different Methods of Payment
Cash. Check. Credit card. Debit card. PayPal. There are many ways to pay. If you aren't accepting more than one or two ways, you are missing out. Allow your customers to pay online. You can send your clients invoices via email or text. They can view their invoices in their offices or on the go. This will also give them the ability to pay from anywhere and at any time, giving your business the revenue it needs.
Sometimes business owners make errors in various parts of their business. You may be able to make mistakes in other parts of your business but you cannot afford to make mistakes in accounts receivable. These mistakes are often mathematical errors. Maybe you apply an overpayment to a client’s account who has not overpaid. Maybe you charge too little on another account. Either way, mathematical errors could be the downfall of your business.
Not Penalizing Late Payments
It happens. Clients forget about a bill and remember after the due date. Perhaps they don't pay a bill until the next bill they receive. Some clients do it because they can get away with it. Don't let this happen in your business. Charge a late fee when clients pay late. You may make it a low or high percentage of the bill. Either way, you should not let your clients feel like they can pull off not paying on time. Make sure that the late fee you charge is compliant with your state law.
Do you need accounts receivable help? Clients ARM has over 30 years of experience in managing accounts receivable. They apply old-fashioned customer service principles and innovated technology to give you the peace of mind that your clients are receiving the best service around. Contact us today for your free consultation!