Persistence is key to collecting on-time payments, but it takes a lot of time and discipline to be successful with manual accounts receivable (AR) processes. Customers that are contacted regularly for payment know you mean business and are more likely to schedule your invoices for payment. Here is how you can be persistent and successful in collecting on-time payments, and still have time for other AR priorities.
Automatic Payment Reminders Save Time, Increase Persistence
In collections, the squeaky wheel does indeed get the grease. In a manual accounts receivable system, you have to remember to follow up with a phone call or email to the customer. Sorting through paper files and leaving sticky notes around your office is a haphazard and inefficient system for following up on collections, leading to wasting the time you need for other high priority tasks.
With AR automation you can program payment reminder emails to be sent automatically based on customer payment habits. Using the same schedule for serious late payers and customers who rarely miss due dates is ineffective, and can be annoying to customers who usually pay on-time.
Based on customer payment history you can program:
- 1st past due reminder – Wait a few days after the invoice due date in case the payment is in transit.
- 2nd past due reminder – Give it a week or so depending on the size of the invoice and the circumstances. If customers are closed because of a pandemic lockdown or other external factors, it doesn’t help to pursue aggressive collection policies prematurely.
- 3rd past due reminder – Same approach as the 2nd reminder, but if there are no extenuating circumstances keep the timing tight.
- Final past due notice before collection – Follow your policy when it fits the circumstances. Don’t delay taking action on uncollectable accounts. The odds of collecting anything decreases with age.
Digital Solutions Increase Effectiveness
Automated accounts receivable and automatic payment reminders are more efficient and effective for collecting on-time payments. They free up your AR team for high priority tasks, reduce DSO and increase cash flow.
With a connected accounting solution for your accounts receivable and accounts payable teams to coordinate work with customers and vendors, you can optimize your outreach, while improving the relationship with your customer’s accounting teams.
Lockstep, a leader in cloud-based connected accounting solutions, can help you boost productivity and optimize cash flow with:
- Automated Communications
- Customer Self-service
- Collections Activity Management
- Reporting & Forecasting
If you would like to learn more about how you can benefit from connected accounting solutions, please contact Lockstep or visit us at www.lockstep.io.