Agricultural industries are some of the most unique when it comes to accounts receivable. Majority of business occurs during three to four months, and then it will taper off as the season ends. The rest of the year is spent putting money back into the business to prepare for the next big boom. This can be really difficult when it comes to managing cash flow. You must be extremely accurate in your sales predictions and you have to collect all of your invoices on time. Collecting, however, isn’t always so easy in agriculture accounts receivable.
Businesses in agriculture need to be on top of their collections more than any other industry. Without a steady cash flow year round, it is extremely important that each customer is collected from on time. Here are four ways to ensure your agriculture accounts receivable are in the best shape.
INVOICE ON TIME
There should always be a specific day out of the month that you invoice customers. By creating an established day, customers can make sure they have the funds in order ahead of time. The invoices should be sent out to clients not later than a week after they have received the product, any later and they will not see paying you on time as a priority.
CUSTOMER HISTORY
If you are offering credit to customers, always check to make sure their credit history is clean. If a customer struggled to pay another business, they will likely struggle to pay you as well. You’re gambling with your own businesses finances when you don’t check into your customer’s.
PENALTY FEES
If certain customers are continually paying late, it is time they faced a penalty. By enforcing a 2 percent late fee, customers will be more inclined to pay you on time, or even early. Make sure you let new customers and current customers know up front that there will be a late fee.
If you’re a company that qualifies for PACA (the Perishable Agricultural Commodities Act), you also need to be aware of which customers fall under the penalties of the act. By organizing your accounts, you can be sure that the trust is created and a lien is placed on the account when you are not paid on time.
AUTOMATE
A lot of the above mentioned ways to increase agriculture accounts receivable include spending more time and energy. In the agriculture industry, more time isn’t really an option. Using an agriculture accounts receivable software can automate a lot of these processes for you, like keeping track of late payers, invoice creation, customer credit history search and workflows to prioritize actions. By automating the process, you’re able to cut down the time spent on agriculture accounts receivable while still increasing your cash flow.
There are so many costs associated with the agriculture industry, such as new equipment, supplies, seed, bait, feed, or land costs. If you’re not collecting on invoices on time, it can seem like you’re moving backwards. By invoicing early and often, enforcing deadlines and checking out customers before hand, you can ensure you will get paid on time every time. By simply automating the process, you can get all of the agriculture accounts receivable needs done in less time than before.
