Cash flow is critical for any business. To be effective, the accounts receivable process must include strong best practices for handling collections. If you lack a modern system for cash in/cash out, getting paid on time is hard—and it can kill your business. Here are five best practices to apply to your collections efforts that will yield real ROI.
5 Collections Tips
1. Start by evaluating your processes and eliminating any manual systems and workflows. If you’re using Excel spreadsheets or other manual processes to bill your clients, you increase the risk of error. The best software tracks money in and out in real-time online. This will ensure that mistakes are few to non-existent. It will also improve the chances that you are paid on time.
2. Don’t send out paper invoices, either. That’s a practice that went out in the year 2000. It’s much easier to have an electronic trail—paper can be misplaced. Your client can lose an invoice under a pile of papers on the desk. Certainly, sending something through the mail slows down your collections processes. Delivering your invoices electronically is a modern-day best practice that you should certainly adopt.
3. Invoice clients when they are most likely to pay. If you know, the client is a 30-day pay, invoice as quickly as possible, perhaps even in two-week increments, to improve your cash flow. Your goal here is to “game” the system by understanding how the client conducts their payment processes. With good software, you can automate these complexities to not only reduce the risk of fiscal errors but also to be certain the invoices go out at the right time. That way, you’ll know cash will continue to come in without any big gaps in billing and receiving.
4. Always incentivize the client for early payments. You’ll find that the small discount you offer is worth the time you’d spend following up on the payment or waiting for it to appear. If you have a cash-strapped client, this will be an appealing reduction in their bill. This policy will create goodwill between you and the client. But don’t forget to remind the client every month on their bill that they should take advantage of this incentive.
5. Be consistent in your approach to billing and collections. For example, your workflow could be:
- Email the invoice.
- Call the client the day the invoice is sent to see if they have any questions about the bill.
- Email the client two days after the invoice is sent to remind them of the early pay discount and to call for personalized service should they have a question.
- If the payment hasn’t been received on the day it is due, call the client to be sure the payment was received and sent. Find out if any issues will slow prompt payment. Thank them for their patronage.
- Once the bill is paid, email a receipt and a thank you.
Automated software can help with these processes.
An employer of record like FoxHire has sophisticated software to help you automate billing and collections. But we also can manage the entire process for staffing firms seeking to improve their cash flow. Talk with our team today to find out more.
