Better manage your accounts receivables
It can be easy for small business owners to get so caught up with setting up their business that they forget to invest the same energy into their accounts receivable process and practices. It pays (literally) to have a business receivables plan in place to save you time and stress, increase the likelihood of getting paid on time and reduce bad debt. Read on for CreditorWatch’s four simple steps to managing your company receivables.
What does accounts receivable mean?
Xero, a leading provider of small business accounting software, defines accounts receivable simply as “the name given to both the money that’s owed (to you by customers), and the process of collecting it.” A small business owner might not always have the time or an affinity with numbers to deal with the accounts receivable process, and this where software like Xero and MYOB really shine.
SME owners can even integrate their Xero or MYOB package with CreditorWatch to reveal the risky debtors lurking in their business receivables and perform automated credit checks.
1. Plan and document your accounts receivable process
Accounts receivable management is often an afterthought, but never underestimate the importance of implementing a clear accounting system. This includes sending out invoices with each delivery, and following up on late payments with reminders. CreditorWatch automates many of these debt collection tools for you so it’s faster and easier to create a professional rapport with customers.
Have a plan in place should your debtor fail to pay you on time. Establish how long you can wait before making contact. For example, you might follow up after seven days with a statement. After 14 days, follow up with a phone call. If a customer is used to hearing from you on a regular basis, they’ll be more likely to pay up.
Read this blog post for more tips on how to collect debt without straining customer relationships.
2. Publicise your credit policy
Decide what your accounts receivable and credit policy should be, discuss it with your staff and, most importantly, communicate it to your customers.
From the beginning of your working relationship, set your expectations of when payment is due and get this customer agreement in writing. Once an effective accounts receivable process is in place, it’s even easier to manage it in-house and onboard new customers.
3. Have an eye for detail
Knowing your customers by their first name (or nickname) is great for rapport, but it’s even more important that all their invoices are labelled with the correct trading name, ABN and contact details.
By being strict with your accounts receivable details, you’ll have a strong foundation to refer to if you need a debt collector or lawyer further down the track. When you perform a business credit check with CreditorWatch, you’ll get access to all your customers’ correct details as well as their trading history and credit performance. Use these details, like defaults and court notices, to make better informed decisions around your business receivables.
4. Stay up to date
Performing a company credit check at the start of a business relationship isn’t enough to stay ahead of the warning signs that your debtor is in financial difficulty. Your customers’ financial position can and will change, and you need to be notified when these changes occur.
CreditorWatch’s 24/7 customer monitoring service helps you build a more organised accounts receivable process. As a CreditorWatch customer, you will receive a real-time email alert every time an important change occurs with one of your clients. These changes can include red flags like a payment default being lodged by another business or a court judgment.
You can then use this information to your advantage by reaching out to the customer or adjusting their credit limits so you can better protect your business.
There you have it: the top skills you need for successful accounts receivable management in your business. If you’re struggling to stay on top of the numbers, reach out to a credible accounting service for assistance with all things financial, including cash flow forecasting and tax planning.
For additional help with your debtors or collecting money on time, please reach out to CreditorWatch on firstname.lastname@example.org or sign up for a seven-day trial.