Do you constantly have to deal with clients taking longer than 90 or even 120 days to pay the invoices you’ve sent them? Do you also find that it takes a lot of time, effort, and resources to continue following up on these invoices until your client finally relents and pays you what they owe? If so, then you may need to improve your accounts receivable collection process. Otherwise, not only will this issue of late invoice payments persist, but it may also put your business at financial risk.
What is accounts receivable?
The term “accounts receivable” refers to payment that a client owes to a company after acquiring the product or service they purchased. While a rare or even occasional delay in payment may be negligible, repeat instances of it can hurt your company’s cash flow. This can affect your ability to attend to certain financial responsibilities that help keep your business afloat, such as reducing your debt, managing your overhead, investing in employees and other business resources, and more.
With this in mind, minimizing the incidence of accounts receivable should be one of your main priorities. The following are some tips to help you attain a much-improved accounts receivable process.
Adopt an Enterprise Resource Planning solution
If you have yet to integrate an enterprise resource planning solution (ERP) into your company infrastructure, then you should consider doing so at the soonest possible time. An ERP solution refers to a specific type of software that organizations and companies use to manage business activities such as accounting, procurement, inventory tracking, regulation compliance, and even accounts receivable.
By having an ERP solution assist you in the management of these tedious tasks, you ensure that they are performed accurately and in such a way that they also help make the business operations that hinge upon them more efficient.
For example, using an ERP system to handle inventory tracking allows all the items in a specific warehouse to be accounted for when using an electronic database. This database is constantly updated and is easily accessible to all backend and customer-facing departments that need to interact with the product inventory. If a customer asks the store staff about the availability of a specific item, all that’s needed is to bring up the inventory manager in the ERP system and search for the desired item.
This entire process would take no more than a few moments, which helps improve customer satisfaction and assists in securing a sale.
An ERP solution will bestow the same positive effect with accounts receivable collection. As your ERP solution automatically keeps track of all your business transactions, so too will it be able to catalog all your clients who are being late with their payments. This prevents you from losing track of any of your accounts receivable incidents, as well as keeps you constantly up to date on how long a specific client has allowed an invoice to go unpaid.
Moreover, you can also have your ERP system automatically send out emails to clients to remind them of their tardy payments after a specific time limit has been reached. These traits and more can significantly aid you in your accounts receivable collection efforts.
Ensure that you deliver invoices in a timely fashion
Make sure to minimize the delay of sending out an invoice and ensuring that the client has received it, along with their purchased service or product. Doing so does three important things: first, it reminds your client that their purchase was not for free. Second, it tells them that your company’s invoicing system works and expects the payment to be made ASAP. Third, it brings the matter of payment to the client while the memory of their purchase is still fresh in their minds. This helps minimize the possibility that your client may forget about their purchase, and thus lapse on payment.
Double-check invoices for accuracy and correctness before sending
No client wants to receive an erroneous invoice. Whether it’s the total charged amount, the type of purchase, or even the date of the transaction, an error in any of these on your invoice will result in your client being skeptical of every other invoice you send them from that moment forward. This may result in them being slow in their payments, as they may find it more convenient to wait for your first follow-up call so that they can ensure that you’ve double-checked and verified the amount they owe you. This waiting period can add to your accounts receivable incidence.
Prevent this by making sure that all your invoices are accurate down to the last cent. Double-check them before sending them off. An ERP system can also help in this regard.
Establish a billing dispute process
There will come a time when your client may want to dispute an item or charge on your invoice, such as in the scenario described in the previous item. Encourage your clients to get in touch with you as soon as they find an error with your invoice by giving them a billing dispute process that’s easy and quick to engage with. This reassures them that even if they do find something off with your invoice, your company is there to set things right at their convenience.
Incentivize early payments
Consider offering incentives to encourage your clients to pay early, such as a small discount, free shipping, or an extended warranty period for those who pay immediately with their purchase. The key here is to make your client feel rewarded positively when they keep up with their payments, rather than avoid punishment for being late.
Provide multiple payment options or methods
Finally, another way to improve your accounts receivable process is to eliminate as many obstacles to your being able to receive payments. One way of doing so is to provide your client with as many payment methods as you can reasonably muster, such as PayPal, Stripe, or Venmo. This way, they will find it easier to send their payments on time and in the method that they are more comfortable with.
Improving your accounts receivable process means improving business cash flow
While it may seem prudent to simply let your client take all the time they need to pay your invoice, the reality is that late invoice payments harm your business and its ability to be profitable. By adopting the tips listed above, you can improve your accounts receivable process, while instilling a positive culture of prompt invoice payments in your clients at the same time.
As for what ERP solution to choose, you can’t do any better than SAP Business One, the premier choice for small to medium businesses. Designed by none other than SAP SE, the German multinational company responsible for the development of the very first ERP solution, SAP Business One delivers the powerful features of an enterprise-grade solution in a package that’s priced and packaged accordingly for smaller organizations and companies.
SAP Business One is available from ANSI Information Systems, a verified SAP Gold Partner in the Philippines. Our clientele includes some of the biggest movers and shakers in their respective industries, such as Chowking, Greenwich, Red Ribbon, Savemore Market, Nissan Universal Motors Corporation, and many others. Get in touch with our consultants right now and see what we can do for you.