Everybody wants to get paid and everybody wants to get paid on time. Getting paid is a business of itself, and it takes diligent management of your receivables to make it happen. However, not everyone realizes how much attention receivables really do require. They want the money, but not necessarily the work it takes to set-up a seamless system to make getting paid possible. If you're doing one of the following below, you are not managing your receivables in the most effective way. But, change these habits today, and you'll find getting paid is a lot less painful than one could have ever imagined.
The 6 Most Ineffective Ways to Manage Your Receivables
1) Not Having Your Priorities Straight - If your receivables are not at the top of your priority list, you are already in big trouble. Yes, it's true, you're a business owner or an insanely busy employee and you just don't have time to make everything a priority. But the money your business is owed should always be at the top of that list, whether it means hiring someone to take on the responsibility part-time, or making it a habit to set aside a few hours a week (say every Thursday from 1:00 PM to 3:00 PM) to devote to these invoices. By making receivables sit atop of your priorities, you will instantly increase your chances of getting paid.
2) Disorganized Communication - Are you printing out your aging reports and making notes of your communication on those papers? What happens when those papers are thrown away? What happens if another employee tries to contact the customer and has no record of your call to reference? You need to be using a CRM system for your receivables management, one that allows everyone (even if it is just yourself) to know what's going on with a customer and what actions have been taken. Not sure where to start? Try out this CRM for receivables management for free.
3) Only Accepting Checks - In this day and age, if the only way you are accepting payment for your receivables is by a check through the mail, you are automatically decreasing your chances of getting paid. You are making it more difficult for the customer to pay and easier for them to forget. By accepting online credit card or ACH payments, you are allowing the customer to take instant action on a payment, as well as giving you an easy option to set-up an installment plan (a great way to get a cash-tight customer to start paying).
4) Following Up...Eventually - In receivables, the longer you wait, the harder it is to get paid. In fact, for invoices 90 + days past due, it's nearly impossible to collect. The day an invoice becomes past due, you should start taking action. The best time frame is within the first 30 days of the invoice becoming past due. Whatever you do, stop delaying. Unpaid invoices require immediate attention.
5) Never Picking Up the Phone - It's great if you are sending your customer reminder after reminder about their unpaid invoice, but if you are not seeing a response, you have to change your tactics. As busy as you are, you can relate to just how busy your customers can be. Sometimes, when they receive mail, it gets pushed to the side and easily forgotten. However, a phone call can help put things in motion. When you call your customers in regards to a late payment, they will see just how serious you are about getting paid. You'll help put the payment back at the top of their priority list. Many business owners avoid these calls because they can be tense. But, if you prepare properly beforehand, even referencing a collection call script, then you'll be able to gracefully handle the receivables call.
6) Letting Things Slide - If you never "punish" a customer for paying late, then why should they avoid doing so? To help motivate on-time payments, develop consequences for late payments. Late fees are an excellent example, as no customer wants to have to owe more than they already do. Just be sure to check your state's usury laws so you are not charging too much. Also, alert the customer when you first invoice them, so they are well aware of the consequences of not paying that particular invoice. Running a strict credit-process is key in managing your receivables.