Accounts receivables management is an important function in a small business, but often gets pushed aside in favor of sales, customer service of general operations. When small business owners tell me they are too busy to manage their accounts receivables, I ask them if they would forego new business sales or customer service. Of course, the answer if always no. What good are new business sales if you are not being paid for them. In fact accounts receivables management, new sales and customer service are interrelated.
With a strong accounts receivables management program, you will be able to determine which customers deserve the most credit, and which customers you should limit. Your ability to provide credit in a smart, informed way will boost your sales.
Customer service can also be enhanced by offering customers who may be behind in payments a small discount, or by offering to roll in a new order at a discount if balance is paid in full.
Accounts receivables management for small business hinges on communication. So many bills go unpaid because they are sent to the wrong address, or to the wrong person in an organization. Speak to your customers regularly, and update their information with every contact. Determine each customer’s preferred method of communication: phone, text or email.
Regularly review the 30/60/90/90+ aging of your receivables weekly. Assign a staff member to follow up by phone to each delinquent customer. You will be amazed at how many people will pay after receiving a phone call, text or email from you.
Compose a collection letter to send to each late-paying customer.
Finally, set a limit as to how long you are willing to wait before you decide to hire a collection agency. After 90 days, if you have no contact, you have a problem and you need to bring in the experts. Waiting too long to collect your money could hurt you.
Accounts receivables management is not rocket science. All it takes is commitment and communication.