In a perfect world, clients make their payments in full and on time. Doing so allows your company to replenish your funds and keep your business afloat.
In reality, however, clients don't pay right away. This puts you at a disadvantage. While it is ideal for you to attract customers who make payments after receiving your products or services, you don't get to maximize your business if you don't entertain your customers' needs of buying now and paying later.
Accounts receivable caters to the latter. You can send your products and services to clients who will send you the payment at a later date.
The problem with accounts receivables starts when it comes to tracking your receivables. By not managing them, you push back the payment schedule for your clients, which leads to a loss of revenue.
To avoid your business from running out of funds, you need to follow the best practices of managing your accounts receivables so you can get the money you are owed in time.
Have a credit policy
You shouldn't give out accounts receivables to all your potential clients. Even though they're interested in what you offer, you can't be sure that they will pay for their purchases.
To determine who gets offered a line of credit, you need a credit policy that weeds out leads with a poor credit history. By identifying people with a good credit track record, you can minimize the risk of not receiving a late or defaulted payment.
Maintain clear communication with clients
The assumption that clients are unable to pay their account receivables is they don't have the money. However, there are other reasons why can't make their payments on time. Some of the logic behind their reasoning are flawed and has to do with miscommunication with your company.
To solve this issue, you should constantly remind them about their payment, so it won't go over their heads. You can assign someone to call or message the clients weeks and days before the due date. You can also send them an invoice via email to make sure that they get a copy as proof.
Prepare for financial cushion
Until they make the payment, you are working at a deficit. Therefore, you need to develop a contingency plan that allows you to meet your monthly sales quota if the accounts receivables are not paid at the expected date. Borrowing from a bank or delaying your payables are ways on to maintain your cash position.
Be aggressive with negligent clients
Some customers need a bit of "incentive" to pay their accounts receivables on time. One way of doing this is to charge interest to late payers, which should encourage them to pay as soon as possible to avoid incurring unnecessary costs.
If the clients are still not able to pay their accounts receivables after a given time, then you have no choice but to cut off their credit. Letting their negligence slide only exacerbates their bad behavior so you need to put a stop to this before your business goes bankrupt.
Another approach you can take is to hire a collection agency. While this can be considered a harsh move by some, your focus should be about keeping your business afloat and serving customers who actually pay with the best service available.
Automate your process
Staying on top of things to manage your accounts receivables the right way is burgeoning. You'll want all the help you can get to see that clients pay on time.
Using a tool like Apruve will take the stress out of manually tracking all your receivables and following up on each of your customers.
The tool is a full cloud-based credit management solution that automates and finances your credit program. By using Apruve to streamline your credit management, you can ensure to improve your cash flow and eliminate the risk of not collecting payment from your clients!