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7 Ways to Improve Your Account Receivables Collection

Every business owner realizes how crucial maintaining cash flow is for a business. Many bankruptcies take place simply due to cash flow issues that make it impossible to sustain the business. That’s why it’s essential to manage your account receivables properly so that the money coming in can be more than the money going out every month. 

In simple terms, the account receivable is money that is owed to your business by a customer or client. In certain business sectors, it is common for clients or customers to delay paying their invoices. However, this creates a problem for the business since they need their invoices paid to keep the lights on. 

Here are 7 ways to improve account receivables collection and say goodbye to cashflow issues. 

Ways to Improve Your Account Receivables Collection

Flexible Payment Terms

It’s important to empathize with the needs of your customers or clients whenever possible. The goal should be to collect your dues without affecting business relations. As an account receivables collection example, many times, accounts become overdue because your customers face financial issues that may be caused by factors outside of their control such as a dull season. 

In such circumstances, keeping flexible payment terms can help your customers tide over a difficult situation and also help you maintain long-term contact. For example, if it’s necessary, you can consider changing your net 30-day payment requirement to a net 45-day payment that can provide the necessary leeway to your customer/s. 

Leveraging Data

Using data has become much easier in the digital age than it was ever possible before. This means that businesses that are not collecting, storing, and processing this data are losing out on a significant opportunity to make their business more effective. The data can be used in several ways, and one of them is collecting overdue payments. 

Businesses can collect data on their customers such as their purchasing patterns, the length of the relationship, how they found out about your business, and so on. Once you have this data, it becomes easier for you to negotiate terms and conditions with your customers based on their past history. 

A collection example in such a scenario would be to provide more flexible terms to a long-term high-value customer than you would otherwise. 

Sending Reminders

More often than not, customers need to be primed before they are ready to pay the invoice. Regular reminders by your business before the last date for payment of the invoice helps to ensure that paying the invoice is on the customer’s mind and he has prepared himself to pay the invoice. 

Further, another common issue is that a customer simply inadvertently forgets to pay the invoice. Life is busy for all of us and invoices payments can fall into the cracks quite easily. Regular reminders ensure that forgetting is not an option increasing the likelihood of your invoice getting paid on time. 

Training Employees

In most cases, your employees will be in charge of collecting payments on your behalf. They may be the link between your business and your customers. In such a scenario, it is important to train your employees on how to effectively handle such calls. 

When they are directly talking to the customer, then the employee needs to finely balance getting the invoice paid while maintaining the relationship with the customer. He needs to be able to negotiate the best terms and also persuade the customer to make the payment as soon as possible. 

Training your employees in these skills can help you make your account receivables collection more efficient. 

Following Systems 

It’s best to follow a standard operating procedure when it comes to collecting overdue payments. The system can include when emails or messages need to be sent when a personal call needs to be made, and instructions on how to initiate such conversations. 

Further, the system can also include scripts for the messages and calls that can help your employees take over the reins. Also, consider common accounts receivable collection examples to ensure the best results. 

Overall, the best aspect of having a proven system in place is that it takes the stress of the moment away and it becomes more like a routine task that needs to be done. 

Effective Follow Ups 

A common accounts receivable example is a customer simply ignoring your invoice. 

Once an invoice has become overdue, it is essential to start the follow-up process. Taking too long before a follow-up sends the false signal that receiving the payment is not important for your business and it also reduces your bargaining power.

The follow-up should be completely cordial and take the form of a reminder rather than a call for action. This helps to preserve your relationship with the customer while also increasing the likelihood of the invoice being paid as soon as possible. 

Once the first follow-up has been sent, remember that it is not the end of the process. It may happen that the invoice is still not cleared and that’s why you need to be ready to send periodic follow-ups with a smooth but not aggressive escalation in tone and language.

How Legodesk Can Help?  

Legodesk can help systemize and automate the account receivables collection process for businesses. If your business has a constant need for collecting overdue payments, then investing in our software solution is the right choice for you. 

Legodesk offers contact management, case management, legal notice automation, and several other features that make it a single source of truth for your payment collection needs. We are trusted by banks, NBFCs, as well as enterprises and have built a strong track record. 

Get in touch with us so we can take you through our tool and help you make an informed decision. 

Wrapping Up

Collecting overdue payments is part and parcel of the business process. Almost every business faces unpaid invoices quite regularly and that’s why it’s essential to develop processes and systems to tackle the issue head-on. 

We hope that the methods outlined above will help you level up your business and make the invoice collections process a breeze. 

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by Sushree Swagatika

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