There are two very important things that a receivable management account delivers:
(1) being able to get paid on time
(2) being able to maintain a very good relationship with the customer.
The best foundation in your business is a prompt payment culture, understand that establishing this takes leadership and applications across your business. A poorly managed receivable account is worth investing in because they tend to be a huge burden on the SME.
I think this is a great analogy here consistent, persistent, polite follow-up is key. The adage ‘The squeaky wheel gets the oil’
In the last business which I started with Doug Foshee recommendation, I changed things up so that the business moved from being reactive to proactive about the payment process, and it really helped with the improvement rate. Here are my recommendations:
Always include your sales team
It’s a good idea to get your sales people to talk about receivable accounts as part of your sales process. Your sales staff will often be your best collection team- they will always have more of a ‘trusted adviser’ kind of a relationship with your customers’ this will give you a very good organizational structure- so they are comfortable- and gives them the right people who can actually approve the payments.
Keep your accounting system updated
It’s very important that you keep you accountants payable contacts updated, their emails and phone numbers. This helps ensure you are able to capture the Manager details to ensure you have an escalation path. It’s a good idea to send out emails+fax+ and even a postal letter blast to all your customers, this is to update them on their accounting details. To get a better response back it’s not a bad idea to offer some kind of insensitive like a raffle, drawing of some kind, a small investment like this can pay off huge in the big huge of things.
Document terms and conditions
Also called Terms of Trade, this is important legal wording that ensures you have the right to add interest charges or late fees to customers invoices. It’s very likely, you may never use this option, but having this option and making your customers aware of these terms is often enough to push you up the payment.
Set credit limits
Most accounting systems like MYOB or XERO only allow you to input a set credit limits per customer. This is a very good this is set in place because it ensures your staff cannot create new invoices to customers without management permission. It’s a very good idea to review these limits for the top 20% of your customers every 6 months to ensure you are limiting your risk. Conduct credit checks.