Maximizing your receivables is essential to the life of your business. You must avoid holding back or becoming lax when it comes to asking for money that is owed to you.
When signing on a new account, be certain to emphasize your payment terms. Your payment terms outline the timeframes in which you expect to be paid. Verbally review your payment terms with your new customer and ask that they sign on the dotted line accepting your terms.
Optimize the payment process with a courtesy call shortly after services or products were provided. Inquire if the order was received and confirm that there were no disputes with your products or services. Document all correspondences that transpire during the duration of all business relationships. Reiterate when payment is due. To help expedite payments received, you may consider offering a nominal discount if the account pays within a specified period of time (generally 10 days).
Invoice immediately. Invoices should be drafted at the time the order is placed; thus, there is no reason to delay invoicing until the end of the month. This sets the stage for more timely payments received. Companies that invoice immediately and include the invoice with delivery experience expedited payments.
Managing your receivables must start with recognizing when an account becomes past due. Your payment terms should dictate when payment is expected and what consequences will occur if payments extend past the due date; a 1.5% late fee is the typical standard. It is important that you add the late fee to the first invoice that requires duplication. When you reissue an invoice in an effort to be paid after the due date has expired, you set a standard that gives you negotiating power. If you need to remind a customer their account is past due, and they have received a duplicate invoice that has incurred a late fee, you can offer to waive the late fee if the account is paid within a specified period of time (no more than 10 days).
Monitor past due accounts and initiate a consistent follow up process. Avoid waiting thirty days between follow up correspondences (verbal or written). If your payment terms are Net 30, follow up on the delinquent account on the 31st day. If your customer suggests cash flow problems are the reason for the delay, offer to arrange a payment schedule to expedite the payment process. Begin by offering to break the payment into two equal amounts, and negotiate the schedule based on your customer’s ability to pay.
About The Author: Donna Vestre is President and Founder of South Coast Revenue; a Professional Risk Management Firm based in Orange County CA. Donna has over 28 years experience in the debt collection and account receivables industry. Donna is the author of the popular digital resource guide, “Account Receivables – Your Guide to Getting Paid!” A B2B Resource Guide designed to empower businesses in achieving their most successful collection results! For more information about South Coast Revenue, please feel free to visit http://southcoastrevenue.com/ and browse the wide variety of resources and services available to you.