The holidays are a special time when your business breathes out a sigh as one year ends and another begins... Right?
Before that happens, there is much to do! The end of the year signals the looming beginning of tax preparation and budget decisions. It also means closing out the books for the year and discovering delinquent receivables.
Start with a precise measure of cash flow and accounting to ensure that all records are up to date. These first steps are part of an accounts receivable clean-up process so that all statements and accounts are accurate for better year-end planning.
Reconcile financial statements, bank and accounting records, and payments that have been received.
Identify accounts that need to be billed and get those invoices out immediately. Your accounting method and your payment terms will determine if you can expect December payments before the end of the year or if those payments will be recorded in this year's books.
Identify any unpaid invoices from earlier in the year through an aging report. Contact any clients who haven't paid and who are likely closing out their own books for the year too. You could send a demand letter, make a phone call (here's what to say!), or even use the holidays as an excuse to re-establish your working relationship. We've created a sample template that makes a demand letter sound less demanding (download here).
See also: Holiday Tips for Treating Your Client Well Even When They Owe You Money
The fastest way to receive client payments is to provide an easier payment process. Waiting for checks, especially with the onslaught of holiday cards and gift shipping season, may not be a wise idea. Digital payments, ACH or even credit card payments allow clients some flexibility to pay quickly and could prompt payment when following up.
If your collections efforts have stalled, there are options available before writing off the debt including settling or negotiating to accept less than the total amount due. Another option is to work with a collections agency to recover the total amount.
Otherwise, the IRS suggests writing off receivables at the end of the year if:
Even if an account has been written off as bad debt, a collections agency can still help collect most, if not all, of the total amount. By being equipped with this knowledge and these tools, past due invoices can be a minor inconvenience that will be resolved quickly. Let us know how we can help bring joy to your holidays!