If you’re having a hard time getting paid on time, you’re not alone. Companies across industries and of various shapes and sizes have trouble with accounts receivable collection, but before you can solve the problem, you must first identify what exactly is causing it. For example, are your invoice collection problems due to poor invoicing procedures, incorrect information, a lack of resources, or another reason all together?
Below are 5 of the most common issues we’ve seen crop up time and time again as we work with customers to solve their collection troubles and improve their accounts receivable collection process.
Most customers want to pay you on time, but they won’t if there are problems with the invoice. Are your invoices missing the customer purchase order? Are they being sent to the wrong person or the wrong address? Is the billable rate or freight rate wrong? Are they tax exempt, and you continue to charge tax? Review all late invoices, talk to your customers and your accounts receivable staff, and identify what’s wrong. If you take the time to investigate, it will be very apparent to you how to resolve many of these issues with small changes in your billing processes.
INVOICE DELIVERY PROBLEMS
Are your customers receiving the invoices? Are they receiving them early enough to pay you on time? Many companies only process invoices once or twice a month. If the invoice is created on the first of the month with Net 30 terms, and you don’t send the invoice to the customer until the 15th of the month, you’re only giving the customer 15 days notice to make a payment on time. Consider processing invoices more frequently and sending invoices to customers electronically so they have more time to review and pay the invoices before the due date.
Most businesses do not have a formalized credit and collections process or software system to support it. As such, they are working with outdated spreadsheets, old aging reports, or they enter information manually into a CRM system to keep track of what they’ve done or what they need to do. Inaccurate, outdated, and hard to access information is not effective to helping you get paid on time. If you feel as though your data is the problem, you may want to consider a software solution to help you better organize, act on, and track this critical information.
Do you have enough people working on accounts receivable? Do they have the proper training and access to information to be effective? Do they have systems to help them streamline their processes? Accounts receivable is likely your largest or second largest asset. Make sure that your team has everything they need to be as effective and as efficient as possible so you can get paid on-time, every time. Identify your team members, roles and responsibilities, and solicit their feedback as they will be able to tell you what they need, what’s working well, and areas where they feel the accounts receivable collection process could be dramatically improved.
In most cases, businesses fail to get paid because the invoice has problems, is sent too late, or the collector is working with bad data. But there are other reasons why business customers don’t pay on time. The customer may be experiencing cash flow problems and is otherwise unable to pay, or perhaps they are simply refusing to pay their bills on time for their own internal cash flow management reasons.