Problems in cash flow can pose a lot of risks, even for a flourishing business. One reason a business experiences these problems is not having a modern and efficient accounts receivable system in place. Without it, the business will not be able to bill clients and collect payments on time.
Here are some best practices to help businesses streamline their billing and collection section.
Excel spreadsheets and manual systems are already outdated, and they can leave a lot of opportunities for mistakes. Businesses should have the best invoicing systems with updated data and program. It should include all the different aspects of transactions, such as product specification and hours billed.
A billing or invoicing system will allow a business to provide timely and accurate invoices for easy collection of prompt payments.
Explore Cloud-Based Software
Most companies today are exploring the many benefits of using cloud-based business management application or software. Good software helps companies accurately track their receivables, such as monitoring the invoices sent, paid invoices, and outstanding accounts.
With cloud-based software, information can be accessed anywhere and anytime, plus they are more secure than other options.
Electronically Deliver Invoices
Tracking down email contact is easier than finding the physical mailing address of a client. Sending invoices through electronic mails also guarantee that the invoice has reached the proper person and it is not sitting on someone’s desk waiting for endorsement. It is also easier to follow up with a second invoice electronically than sending it via mail.
Customizing Invoice Times
One practice for a business to ensure that they can collect payments effectively is to invoice clients when they are most likely to pay. Customize their billing schedules so that clients can pay their invoices immediately.
This may mean having different billing times and accounting process for different clients, but the potential of increasing the cash flow is worth the extra effort.
Invoicing should be done by the people who are responsible for the client. These people work with the client on a regular basis, so they have a clear understanding of the billing procedure and who is responsible for the payment. Delegating invoicing responsibilities to the right person will reduce errors and issues that can delay the invoice and collection of payment.
Discounts for Early Payments
Discounts and incentives, however small, are hard to pass by. Offering discounts to early payments can get most clients to pay earlier, especially those with a history of late payments. The discounts are particularly appealing for cash-strapped clients looking at ways to make more savings.
Remind clients of these discounts each month when the invoices are sent to that they know they have some options and use them.
The Accounts Payable Section
Taking time to secure your relationship with the person responsible for making sure that your invoices are paid is another great practice to put in place. Being friends with the accounts payable person will get your payments in good times and in bad.
Keep a good and lasting relationship with the people responsible because most of the time, these people are likely to pay those they like first when the times are lean.
These practices can help decrease the business’ outstanding invoices and improve cash flow. But there might still be clients who are really problematic and additional help may be required to get them to pay. Set a level of delinquency for sending the invoices to collections sections and offer the client a chance to work it over before it gets to this point.