As we near the end of another year, it’s the perfect time to evaluate your cash flow. Is it a positive stream of money coming in each month, or does the flow dry up into dust after you cover your expenses?
How you answer this question has never been more important. In this uncertain economic landscape, you can’t take anything for granted — every penny counts.
Luckily, even subtle increases to your cashflow can have an impact on your future, so a top-down restructuring may not be necessary before the New Year. You may be able to sweeten your bottom line by focusing on your accounts receivable department and working with a prominent commercial collection agency.
Here at Summit A*R, we want you to flourish in the face of the COVID-19, and part of your success lies in receiving every cent owed to you. While that may seem challenging because of the lingering impact of the pandemic, effective accounts receivable strategies will work. Here are five ways to cut costs without cutting corners.
1. Change Due Dates
Does your payment schedule work against you? Compare your payables to your receivables. If you have to pay your bills before your customers are expected to pay theirs, you may be facing cashflow problems every month simply because of bad timing.
Fortunately, this has a relatively simple solution. If possible, change your customers’ billing cycle so that you collect money from sales before you have to pay expenses.
2. Perform Reference Checks
Depending on your industry, your customers who pay in cash may form a minority. If credit is king for your business, make sure you conduct a background check when you first create an account.
Bad credit happens when someone pays their bills late and carries a lot of revolving credit. Things like chronic delinquencies, charge-offs, and bankruptcies further tank a score, making it harder for the person in question to get approved for financing.
More to the point, what does bad credit mean for your A/R cycle? If your customer has bad credit, they may carry over these bad habits to your account.
The good thing is most Americans have good credit. The average FICO score reached a record-high of 703 last year, so statistically, your customers should have good credit, too. However, if customers with bad credit are setting up an account, you may want to offset their score with higher interest and other penalties for late payments.
3. Automate Your Invoicing
Are you still sending out hand-written invoices through the mail? It’s time for an upgrade. You may be familiar with these old-fashioned methods, but they are leaving you vulnerable to human error. Bad math, illegible handwriting, and other simple mistakes can end up costing you a lot of time and money.
Switching to an automated electronic billing system reduces the risk you’ll experience these errors. Specialized software comes with greater oversight, data management, and other amazing opportunities.
Recurring invoicing, for example, helps you manage and track payments even if your customer base grows substantially. It’s as simple as setting up a charge the one time and letting the software do the rest.
Taking this task off your plate means your A/R team can focus on what really matters. Meanwhile, you can avoid errors to ensure invoices are sent and paid on time.
4. Streamline the Payment Experience
The math is simple. Your customers are more likely to pay you on time when you make it easy to pay their bills. Remove any barriers that could prevent your customers from making prompt payments, and make sure you accept these different kinds of payment options:
- Credit cards, including American Express
- Direct deposit
- Mobile Wallets (Apple Pay, Google Pay, PayPal, etc.)
Choose as many that make sense for your business, putting in the due diligence to understand privacy laws. As a trusted medical collections company, we know PayPal is not HIPAA-compliant, so medical practitioners cannot practically offer this method to patients. Online retailers, on the other hand, may freely use PayPal without worries.
5. Follow-Up on Late Payments Right Away
Whatever your business, providing options reduces the chance your customer can pay bills late and blame it on not having the right account.
Of course, should their account still become delinquent, be sure to follow up on it right away. A proactive approach can help get the money you’re owed faster. Don’t be shy to pick up the phone and give them a friendly reminder of the due date.
Your chat is the perfect opportunity to learn why they’re late. If it’s because they’re facing unexpected financial difficulties due to the pandemic, consider offering them a payment plan. While they may not be able to pay their invoice in one lump sum, they may find it easier to pay you back in installments.
6. Partner with a Commercial Collection Agency
As one of the top commercial debt collection agencies in the country, we would be remiss in overlooking our place in an effective accounts receivable strategy.
Here at Summit A*R, we have no minimums, and we only get paid when we successfully recover your debt. Whether you have one delinquent account or several, we’re able to help. Our diligent team of debt recovery specialists will diplomatically act on your behalf, so you know your business will always be represented with professionalism, tact, and kindness.
After 24 years as a commercial debt collection company, we’ve found that a compassionate approach to debt recovery is the most effective approach. Just look at our recovery rates, which are twice the national average.
Don’t Wait Until 2021 to Deal with Cashflow Issues
The New Year may be a month and change away, but why wait until the clock strikes 12 to consider your goals and aspirations? Take a moment now, before the end of the year, to look at your account receivables. These subtle tips may help you get the cash flowing again.
If you liked the advice you read here today, check out our essential tips for getting paid during times of economic uncertainty. Otherwise, we’re happy to jump on a call to discuss how we can help chase down late payments and get money back in your hand.