You Might Have More Money Than You Think: Managing Accounts Receivable

Keeping track of accounts receivable—and making sure incoming invoices are paid on time—is important for staying on top of your business finances. For one, it helps you calculate profitability and know when to make changes that will help avoid losses. It’s also an essential proof of income at tax time.

But it can also feel completely overwhelming! The invoices, the emails and phone calls… And what happens when a payment is missed?

In this post, I’d like to offer four simple ways to help streamline and manage your accounts receivable. With these tips, you’ll be able to make sure your finances stay on track.

Timing Is Key

I’ve written about the importance of scheduling time for financial tasks before; it’s especially important for keeping track of the money you should be receiving for goods and services rendered. Make sure you spend some time every week handling invoices and pursuing payments.

There’s another time-related issue you need to keep an eye on, though, and that’s due dates. Make sure you set clear payment terms on all your invoices, as they’ll help you get paid sooner and know which late payments you need to check on.

Communicate

Speaking of checking up on payments, do you have up-to-date contact information for your customers? Update addresses (both postal and email) and phone numbers regularly. When you send your invoices, phone or email your clients to confirm receipt. And (this is the hard part for many of us!) don’t hesitate to contact them when payments are late.

Set Limits, But Remain Flexible

How late is late? That’s something you need to decide based on the type and size of your business. How long can you afford to give clients time to pay? If you’re running a business where customers rely on credit to make payments for large purchases, you might have to be more flexible than if you’re managing smaller regular transactions.

In either case, there will be times clients can’t pay on time (or at all). One way to help avoid these situations is to implement interest and late fees. This will help motivate clients to pay on time, and buffer your finances.

You can also establish guidelines that will help you decide when it’s time to let a client go. At what point will you not do further business with them? This can be spelled out in contracts or purchase agreements.

Keep a Paper (or Electronic) Trail

Finally, make sure all of the above ends up in some form of document. You should also include things like notes on conversations and any special agreements concerning payments.

This way, if you ever need to bring in outside help (from an accountant or a collection agency, for example), you’ll have a detailed record of your transactions and communications.

As with any other aspect of your business, it’s all about organization and setting up a system that will help you stay on top of all you need to know. I hope my tips help with this, and I’d love to hear from you! [email protected]

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