Managing accounts receivable is a critical component of maintaining a healthy cash flow & a profitable business. Here are some best practices and tips for setting up payment terms, following up on late payments, and collecting outstanding balances:
1. Set clear payment terms: Clearly state payment terms on your invoice, including payment due dates, accepted forms of payment, and penalties for late payments. You can also include incentives for early payments, such as a discount. Consider offering multiple payment options to make it as easy as possible for your customers to pay.
2. Send invoices promptly: Send invoices as soon as possible after the goods or services have been delivered. The longer you wait to send an invoice, the longer it will take to get paid.
3. Follow up on overdue payments: Don't be afraid to follow up on overdue payments. Send a friendly reminder email or call the customer to inquire about the status of the payment. It's possible that the customer simply forgot or there was a misunderstanding about the payment terms.
4. Be persistent: Persistence is key when it comes to collecting outstanding balances. Follow up with the customer regularly until the payment is made. You can also consider using a collection agency or taking legal action if the customer is unwilling to pay.
5. Use technology to your advantage: Many accounting software and invoicing platforms offer features such as automatic payment reminders. Take advantage of these tools to streamline your invoicing and accounts receivable process.
6. Keep accurate records: Keep accurate records of all invoices, payments, and outstanding balances. This will help you keep track of who owes you money, how much they owe, and when payments are due. Your accounting software and invoicing platforms may make this relatively easy.
7. Communicate with your customers: Communication is key to maintaining a healthy relationship with your customers. Be transparent about your payment terms and policies, and be open to discussing any issues or concerns that may arise. Managing accounts receivable can be time-consuming, but by following these best practices, you can stay on top of it.