A common reason why a private enterprise shuts down is because they have run out of money. In today’s hectic work environment and ultra-competitive economy, it is important to get paid as fast as possible. What business can wait a handful of months to receive their money? The answer is no one, which is why many companies will take advantage of accounts receivable, or AR – you and your team will quickly learn that cash is king.
Here are seven tips to improve your company’s accounts receivable (AR):
1. Don’t Get Stuck in Long-Term Factoring Contracts
Suffice to say, most small business owners make the mistake of entering into long-term factoring receivables contracts. There are multiple negatives of getting involved in such an extensive contract, especially if you think you have chosen the wrong third-party company.
2. Bank Lockbox vs. Private Lockbox
Here is a bit of advice to save you headaches in the future: select an accounts receivable factor firm that uses a bank lockbox rather than a private lockbox. The former is important because banks will extend you detailed reports if the payments take too long to process.
3. Track All Payments Carefully
Perhaps this is just common sense, but every company should track all payments carefully. To ensure that you get paid and you know who owes what, you need to properly monitor payments.
4. Speak with a Bank for Better Cash Managing Tools
As we previously mentioned, your business never wants to run out of cash. Should you not receive your payments on time, then it would be wise to speak with a bank for better cash managing tools to remain in the black. This will prevent stress should a client not pay up.
5. Minimize Any Payment Barriers
You want to avoid excuses, you want to prevent delays and you want to keep the customer happy. The best way to achieve these results? Minimize any and all payment barriers – allows your clients to pay any way that they choose.
6. Limit Credit to Overdue Clients
First, it’s important to establish a credit policy – who, what and when. Second, it is pertinent to limit credit to overdue clients – it’s OK for a client of five years to miss a payment once in a while, but if they do this on a regular basis then you will have issues down the line.
7. Keep Notes of Every Transaction & Meeting
Lastly, like a client relationship management (CRM) system, you should keep and maintain in-depth notes pertaining to each transaction and meeting with your clients. This is an organizational skill that will ensure your company gets its money.