Steady, reliable cash flow is crucial to small business success. One of the best means of avoiding financial difficulties is the effective management of your company’s accounts receivable. Here are some strategies that can maximize income from the invoices you send to your customers.
Establish Terms That Benefit Your Business
When you establish credit terms, it is imperative to find a balance between the desires of your clients and the needs of your business. You should offer terms that are generous enough to be attractive to customers but will at the same time keep your company’s cash flow strong. Waiting too long for payments can negatively impact cash flow.
Send Invoices Expediently
Send out accounts receivable as soon as you have delivered products or completed services. This not only demonstrates your company’s professionalism but also ensures that the funds owed to you will be approved and paid quicker.
Automate Your Invoice Management System
Tracking accounts receivable on physical spreadsheets can be a tedious process. Instead, digitize your management system with appropriate templates so you can instantly send out invoices and easily assess their status. You can also program your system to email you alerts when payments are late.
Monitor the Status of Accounts Receivable
After you have sent out accounts receivable, monitor their status so you can respond swiftly if payments are overdue. The issue may be something simple such as lost or misplaced mail, or it may be an indication that further action needs to be taken.
Decide How to Handle Late Payments
Have a plan in place for how to react when customers are late in paying their bills. Ideally, you need to handle the situation without losing the client. Some companies allow extensions in exchange for a fee or added interest, while others provide payment plans for struggling customers. Resort to lawyers or collection agencies only as last resort.
For more advice on efficiently managing the accounts receivable of your business, contact Rushview Commercial Funding.