Clear communication between businesses and customers ensures quick payment of invoices. Learn four simple ways to manage accounts receivable for optimal cash flow.
How many times have you sent out an invoice without a plan to follow up before the due date? This might work your most dependable customers, but what happens when overdue invoices start piling up from riskier customers? You are stuck making a slew of collection calls while your business stagnates in a state of financial limbo.
Keeping accounts receivable communications open prevents the frustration, wasted time, and potential customer loss that result when collection calls go wrong. The four solutions explained in this blog post and a software-based accounting system will streamline the invoice collection process and make cash flow management easier.
- Send Invoice Reminders
To avoid the collection call no one wants to make or receive, set up a process to remind customers about invoices at various times during the billing cycle. Modern software solutions automate this process, all you have to do is create a collection strategy and draft the necessary emails. The software tracks invoices and sends out the appropriate reminders at each stage of the billing cycle.
There are several times to send out these messages:
- Before the due date to alert customers of upcoming payments
- On the due date as a helpful service to ensure on-time payment
- After the due date to prevent excessive accruing of late fees
Do not wait until an invoice is overdue. Send out reminders to customers who owe money and they will be much happier to hear from your company. Busy customers; who might otherwise miss payment deadlines, remain in good standing so you don't have to worry about how to handle the awkward collections’ conversation.
Use your accounts receivable system to send "thank you" emails to customers upon receipt of payment. Payment receipt emails verify invoice payment automatically and eliminates the need for customers to call about account status. Also, showing appreciation encourages future on-time payment smoothing cash flow for your company.
- Send Invoices During the Call
Does this mean you'll never have to make a collection call? Unfortunately, no. Invoices get lost, unexpected circumstances delay payment, and customers simply forget their due dates. When making collection calls, keep in mind the point isn't to force a payment out of a negligent customer. You are calling to resolve a potential problem, possibly something over which they had no control. Avoid misunderstandings by:
- Asking if invoices and reminders were received
- Getting the correct contact information to re-send lost invoices
- Discussing roadblocks to prompt payment
- Offering an alternate payment method to facilitate timely collection
While you are still on the phone, send out the replacement invoices. Account Receivable software enables the invoices and statement to be sent on demand and arrive in the customer's inbox right away. Ask the customer to confirm they received the email and verify the payment method agreed upon during the call.
- Reminder of Upcoming Invoices
Another way to help customers stay current is to use collection calls as opportunities to mention other invoices due soon. Customers may decide to get future payments out of the way, along with the overdue invoices, so they don't miss future due dates. As an added bonus, processing one payment for multiple overdue and upcoming invoices reduces processing accounts payable time and cost. You may get paid early or will not have to make a future call.
When setting up your automated invoice reminders, list upcoming invoices as well as the invoice with an early due date. This information lets your customers work out a payment schedule to keep them on track and reduce collections calls.
When setting up reminders, remember it's a form of good customer service. Rather than a demand for payment, these periodic emails serve to keep customers in good standing so you can continue providing products and services.
- Monitoring Outliers
An outlier is any change in accounts receivable that disrupts cash flow for your company:
- Overdue invoices
- New payment methods
- High credit balances
- Payment cycles that don't coincide with income needs
Identifying the underlying causes of outliers can help you predict when payments may fall out of sync with past payment history. You will have time to proactively adjust your collection strategy. Look for more about identifying and handling outliers in future posts.
A successful communications strategy is only as good as the elements you record and track. An audit trail, with entries for invoices, payments, and follow-ups, is a lifesaver come tax time or if you move beyond in-house collections.
Clear and open communication between your company and customers is the key to successfully managing collections and accounts receivable. Prevent uncomfortable misunderstandings by staying in contact throughout the billing cycle. You'll enjoy a better relationship with the people buying from you, resulting in more sales and continued growth.
Maintaining these positive relationships is easier with comprehensive software; such as Collect-IT from Dynavistics. Collect-IT is a complete solution for handling all aspects of your accounts receivable and is equipped with a full suite of customizable tools:
- Universal collection strategies with custom options
- Email automation
- Option to attach invoices or statements to emails
- Reminder and collection letter templates
- Detailed task list and calendar
- Audit trail for the collection process
- ERP integration
These and other features of Collect-IT can be utilized as part of an onsite software solution or accessed via the cloud. Try Collect-IT to improve your company's collection process and cash flow today.
Interested in learning more? Check out this product videos:
Account Receivable and Credit Collection Management
Check out these blog post:
4 Tips to Getting Paid Faster for Account Receivable Managers
Reports CFOs and Managers can use to Beat Bad Debt
4 Ways Revenue Analysis can Benefit Your Business
Contact Dynavistics today to request a demo and see what Collect-IT can do for you.
