The best way to collect on accounts receivable is to have an actionable plan. Consistency is the only way to know what to expect, when payments are late, and what your options are for getting paid on time.
Before you do anything, you need to get your business accounting in order. Starting with these basic practices will reduce stress later when your company is growing. Organized company finances not only help you but will also be impressive to potential investors in your business.
Your accounts receivable balance includes client accounts you've invoiced and client accounts that are financing or using credit. Not every client will be approved for credit and, in fact, your business should have a credit manager to determine who is worth the risk. Here are some questions to consider before issuing credit:
A credit manager will also run credit checks on potential customers and help set payment terms. A consistent credit policy will reduce the risk of unpaid invoices by clients who weren't credit-worthy from the onset.
Including the credit policy, a consistent and proactive accounts receivable management process can reduce the likelihood of unpaid invoices. Common procedures for proactively managing your accounts receivable include:
The best way to collect on what's unpaid is to know what's past due. A collections policy will inform your accounting staff on how to handle unpaid accounts and will also let your clients know what to expect if they don't pay on time.
These best practices for your commercial accounts receivable collections will help reduce the likelihood of past due payments. Getting organized and creating consistent processes also greatly improves your chances of impressing investors in your business. Take the time to get ahead and you'll reduce your stress levels too.