5 Accounts Receivable Management Tips for Small Businesses

Managing cash flow is one of the lesser-known skills that an entrepreneur needs to master. Cash flow is the lifeblood of any business, and keeping a good handle on it can make or break a business.

To manage cash flow, a business needs to track accounts receivable, or A/R. A/R is what a business is owed from its customers as a result of selling its goods or services and is still outstanding. In other words, accounts receivable is what you should be paid, but haven’t been paid yet.

Tracking your accounts receivable is crucial. If a business has too much money tied up in accounts receivable, that means less money in the bank account. This can lead to cash flow problems and a lack of working capital. And that can result in an inability to pay bills, make payroll, or invest in new opportunities. Let us help you avoid these scenarios with these five tips to help you manage your accounts receivable.

1. Send Invoices Promptly

Getting paid on time means sending out invoices and payment reminders promptly. Ensure you send invoices as soon as possible after a sale or service has been completed, when the transaction is fresh in the customer’s mind. This tends to help you get paid quickly or at least avoid large payment delays.

2. Follow Up on Overdue Invoices

Don’t be afraid to follow up on overdue invoices. This will help you ensure that you are still top of mind and can help you avoid cash flow problems that might be on the horizon.

When following up on overdue invoices, it is essential to be polite and professional. Start by sending a gentle reminder and ask if an additional copy of the invoice is needed. Give the customer a reasonable amount of time to pay, not too much or too little. If payment is still not received, try calling the customer and talking through the importance of paying the invoice and what they need from you to help with that happening. This can feel really uncomfortable (no one likes to ask for money) but is essential to a quality A/R process.

3. Offer Incentives for Early Payment

Consider offering customers discounts or other incentives if they pay their invoices early. This can encourage customers to pay on time. It also has the benefit of encouraging customer loyalty. Everyone likes a deal!

4. Offer Payment Plans

If a customer cannot pay their invoice in full, consider offering them a payment plan. This will help you keep the outstanding balance ‘fresh’ and can help you avoid cash flow problems.

When offering payment plans, it’s essential to consider the customer’s needs and preferences. For example, you may offer different payment plans based on the customer’s budget and purchase history. You might also consider offering different payment methods like credit cards, PayPal, or direct debit in an attempt to make it easier for a customer to pay.

5. Hire an Accounts Receivable provider

Hiring an A/R service provider can be a great way to boost your business’s bottom line without the headache of chasing past-due invoices yourself (or spending an arm and a leg to hire an A/R professional onto your staff). That provider will work on your behalf to gently remind your customers about unpaid invoices and help get you paid for your hard work. Because they are specialists, they will also be able to do so in a much more efficient and cost-effective way than you could do yourself.

When you hire an A/R provider, they should have a great strategy for getting you paid while making you look great in the process. This could include contacting your customer via phone, email, or other means.

Conclusion

Managing cash flow and accounts receivable is essential for any business. Sales are only as good as the money you actually receive from them. It’s important to keep track of your invoices and ensure you are paid on time. If you fall behind, hiring an accounts receivable provider can help you get back on track and restore some health to your bottom line.

If you're struggling to get paid on time and need help managing your accounts receivable, look no further than CollBox and its “A/R Done For You” service. Our experienced team of professionals are here to help you get your past-due money back quickly and efficiently while also keeping the rest of your money nice and current. Contact us today to learn more about how we can help you increase your accounts receivable health and boost your cash flow.