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How to Effectively Manage Accounts Receivables
From Billing to Collection Efforts
Accounts Receivables can include setting up new customers, maintaining customer account information, invoicing as needed, compiling and distributing monthly statements and following up on past due accounts. In order to properly manage accounts receivables one must be consistently organized and it helps to be detail oriented.
Take the following steps to effectively manage your Accounts Receivables:
1. Establish a new customer information form and/or credit application that each of your customers must fill out. Be sure to include all pertinent information such as physical address, billing address, contact names, phone numbers, fax number, etc. For credit applications be sure to ask for references, banking information, how long they have been in business, etc. Verify their references and payment histories prior to extending credit terms to them.
2. Issue them a notice of terms explaining in detail when and how they will receive their billing, what their payment options are and your expectations as to when they will be required to submit payments, i.e. net 10, net 30, cod, etc. Be sure to include a stipulation of consequences for late payment such as late fees or interest due.
3. Maintain an accurate and up to date file on each of your customers. Process change of address requests and or contact names or number changes as soon as you receive them.
4. Establish a logical filing system for your customer information and billing. See the following link for ideas on establishing a filing system:
5. If you send out invoices based on the customer’s stipulation by a certain date in order to be paid on time, consider utilizing a calendar such as outlook or even a desktop calendar or organizer to remind you when billing is due to the customer. This way you can be sure and meet their expectations in an effort to encourage them to meet yours.
6. Submit your billing on time. Whether your company bills as needed or on a monthly or weekly basis, be sure to submit their billing as quickly as possible so that any issues can be addressed well before the prospective due date on the invoice or statement. Be sure that your billing or statements include the remittance address they are to send their payments to and clearly defines the due date.
7. Make follow up phone calls. Call your customers a few days after you send the bill or statement to be sure they received it and it is on track to be paid on time. Be proactive in your billing and collection efforts. Follow up again with a phone call a few days before it is due to ensure that it is scheduled to be paid. And again the day it becomes past due. Continue calling them every few days once they are past due to ensure that they do not overlook your billing and to let them know you are serious about collecting for the services or product they received.
8. Document everything.Make a call log and record who you spoke with, date and time and what was discussed. This information will be invaluable if you end up having to send the account for collections in the event the customer refuses to pay.
9. Always be courteous and helpful.Let your customers know you are just being diligent and not harassing. Even when they are late, this is extremely important. You want your customers know that you expect payment, but that you value their business. Remember-you get more flies with honey…
10. Manage your time effectively. Utilize a calendar such as mentioned above to set billing and follow up call reminders, create task lists or schedules so that everything is accomplished in a timely manner. Be proactive and professional, organized and neat. It all pays off in the long run.
Remembering that Accounts Receivables is the lifeblood of any business administration is vital to the overall success of the company as a whole. The sales department must sell, operations must act and deliver the service or product, the payable department must pay the bills and meet payroll, but without accounts receivables effectively doing its job, it is all for not.
If the billing is half hazard and the collection efforts non existent, then there is no money coming in, or at least money is not coming in consistently and as expected or due. It will inevitably begin a snowball effect that will suffocate the business.
The condition of accounts receivables can adversely affect the financial stability of a company by interrupting cash flow, damaging credit ratings and references, and possibly halting work causing lost wages and/or jobs. Following the steps as outlined above will ensure the successful collection of receivables and empower your company to grow and progress into the next millennium.