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Successful Accounts Receivable Management: Basic Pre-Collection Tips

January 6th, 2014

Paid receivables are the lifeblood of your business. When you get paid can be critical. Sluggish or seriously past due accounts can cripple your cash flow and place your business in a precarious position. Here are a few basic tips to get you started.

Know the Details From the Start

  • If you are signing a Services Agreement, your own, or that of your customer, make sure all important points are clearly outlined. Don’t sign on the dotted line if any item needs further clarification or negotiation. Get any changes in writing.
  • Ask if there is anything special needed in the vendor set-up process. Is a W9 needed? Will PO #’s or other special information be required on invoices submitted for payment? These kinds of missing items can cause unnecessary payment delays.
  • Know exactly what payment terms have been agreed upon and any special internal processing that may have to occur such as multiple approvals or counter-signing requirements. Will you receive payments via check? Ask if payments can be sent more efficiently, via ACH or wire transfer.
  • Know where your payments are coming from and always have a current AP contact name and phone number. Are payments originating out of a local office or forwarded on to a corporate office across the country? Are payments being made by an outside VMS? (Vendor Management Service)
  • Make sure your first invoice is paid according to payment terms. This can set the tone for all future payments. If not, make sure you know why so you can fix any problem caused from your side, or have a timely conversation with the AP representative or other key contact to reinforce your payment expectations, early on. Make sure your invoice is being directed to the correct address and/or individual.
  • Review your Aging Report or the status of your receivables a minimum of once per week. Make very timely collection calls on all invoices past payment terms. If your customer knows you’ll be calling and questioning them, you are more likely to get paid sooner, rather than later. If you ignore past dues, so will they.
  • Using e-mail for your payment inquiries with little or no direct contact with the AP representative or other key contact is the most passive and least successful form of AR management and collection.

 

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