In corporate accounting, it's not uncommon for an excess of past-due invoices to get put on the back burner due to employee turnover, new accounting software or other challenges in daily operations. Cleaning up or auditing your accounts receivable is a smart idea to ensure those few invoices don't turn into lots of invoices that need to be written off or sent to collections.
With a regular accounts receivable clean up, those "low priority" invoices can add up to a good amount to your business' cash flow.
Why Clean Up A/R?
Without regularly monitoring or auditing receivables and due dates, past due invoices can amount to too much cash deemed noncollectable if not recovered early. Trying to elicit payment from clients who may have replaced your former contact or had an issue with your agreement could be highly challenging and possible damage existing business relationships. Many accounting departments may choose a receivables audit at the end of a fiscal year or tax time. Once a year clean up simply isn't feasible or reliable when your accounts receivable department could be one of your business' biggest assets.
How to Clean Up A/R
One of the best ways to clean up accounts receivable is to stick to a regular self-audit of receivables and collections. The simplest way to do this is to make it a regular calendar event. Some other suggestions to clean up accounts receivable include:
- Examining unpaid invoices and sending out friendly payment reminders
- Reviewing outstanding invoices to make sure the invoiced amount matches the agreement or order
- Researching bank records to see if invoices were paid but the check never deposited
- Comparing to previous audits to see if some accounts are regularly paying late
Keeping a close eye on receivables will also highlight accounting and collections best practices for your business and cash flow.
White Label Past Due Accounting
In addition to cleaning up accounts receivables, another way to increase the collection of aging receivables is to hire a company to represent your business. The process of "white labeling" means to partner with a company who will brand their product or service as your own. When white labeling past due accounting, a professional company, who already has knowledge and experience with A/R and collections, contacts the clients responsible for the unpaid invoices on your behalf.
White labeling accounts receivables clean up can lead to:
- Higher collections recovery
- Suggested best practices for invoicing and accounting
- Problem-solving and troubleshooting repeat offenses/late payers
- Lower days sales outstanding (DSO)
Enterprise Recovery offers the white labeling service to clients looking to increase receivables without paying higher fees for collections services. Limits can be requested to determine which accounts are sent to A/R cleanup. For instance, Enterprise Recovery could attempt recovery of invoices over a certain amount or only those that are 90 days late.