Dealing with accounts receivable is an oft-unpleasant but necessary part of doing business, especially in the world of B2B commerce.
Companies with accounting departments must have a paper trail of all expenses, so rather than paying cash at the time a service is rendered or product purchased, they’re provided with an invoice from the vendor. This invoice is passed through all the proper channels of approval and at some point, usually around 30 days after service is rendered, payment is finally remitted to the vendor.
This careful and deliberate process is great for the company receiving the product or service, as they have extra time in which to find the revenue to pay the bill. It’s not so great for the vendor on the other end of the transaction, however. This company must invest their resource (time, labor, equipment, inventory) into meeting their customer’s needs, then essentially cross their fingers and hope that they pay their invoice on time. Once issued, this invoice enters the vortex of accounts receivable from which it may or may not ever return.
The Commercial Finance Group understands how damaging it can be for these unpaid invoices (liabilities) to sit in accounts receivable for too long. For some companies, this process has triggered serious cash flow issues that can sometimes lead to financial crisis. To help companies avoid this catastrophic situation, we offer receivables financing, a services that can help you turn those liabilities into assets.
Keep reading to learn more about the best ways to manage accounts receivable before they become a nightmare, as well as the reason that many companies turn to CFG in Burbank for receivables financing in their time of need.
Tackling Accounts Receivable Requires Patience & Persistence
One thing many small and medium-sized business owners fail to realize is how comfortable many people are to pay their bills in their own sweet time. They’d never be late on a credit card or mortgage payment, but pay the person who cleans their facility, keeps their walk-in fridge stocked, or delivers the raw materials they need to make their product? Then they’re content to invoke a Net 30 or even Net 60 pay process. Staying on top of accounts receivable is vital to maintaining a reliable cash flow through your business, especially if you’re looking to expand in the near future. Without patience and persistence to follow the tips below, you may find your balance sheets in bad shape.
Tips For Managing Accounts Receivable
- Get Organized – Keeping accounts receivable under control starts with organization. It’s important that you have a very clear and easy-to-use system in place for keeping track of the clients to whom you’ve extended lines of credit, or allowed to invoke a Net 30 pay process.
- Be Cautious With Credit Limits – Guess what? As the one allowing these companies to pay after services are rendered, you can decide who enjoys the privilege of credit and how much credit they can use. “Start extending more moderate terms with customers and let them know they can work their way up to more flexible terms. Not only is this an incentive but it allows you to really get to know customers’ payment habits before you give them too much room to breathe,” explains Meredith Wood at Funding Gates.
- Communicate Creatively – The best way to circumvent client apathy toward paying their invoices is constant, clear communication. There was a time that companies engaged in B2B commerce could only turn to written messaging and telephone calls, but those days are gone. Communicating via social media and email blasts, acknowledging their feedback and referring to them by name are all great ways to help your customers realize there are real people behind your brand. It’s been shown that clients are less likely to jeopardize their relationship with a B2B company when they feel that company appreciates them and runs a tight ship.
- Be Proactive – Don’t wait for accounts receivable to fall into delinquency before you reach out to see what’s going on. “Create a system that allows you to remind customers when they have a payment around the corner. If it is a week before payment is due, and you still haven’t received the check, shoot the customer a friendly reminder email simply reiterating the due date and how you accept payment,” continues Funding Gates.
- Don’t Procrastinate – The easiest time to collect accounts receivable is immediately after it has become past due. If all your proactive reminders haven’t worked, the day an account is overdue is the best time to reach out to the customer via phone. At this point, it could still be an oversight, and a pleasant conversation might be all that’s needed to get the invoice paid. The longer you wait, the harder it will be to track down the client and the more time they’ll have to come up with excuses why they haven’t paid.
- Stay Professional – This is one area where business owners often struggle. You’re an expert in your field, whether that’s janitorial services or aerospace manufacturing. You’re probably NOT an expert in accounts receivable collection, and when forced to take time away from your company to track down a delinquent account, you’re more likely to let your emotions take over. The key is to be stern while also remaining professional.
Don’t Have The Time To Manage Receivables Financing? Let Us Do It For You
If you’re thinking, “that all sounds like a lot of work,” you’re right. Managing accounts receivable is a lot of work, a very specialized type of work that requires persistence, patience, and professionalism. That’s why so many business owners choose to hire The Commercial Finance Group in Burbank for receivables financing.
Instead of using your valuable time to collect unpaid invoices from delinquent clients, we help you turn those liabilities into assets. Then the collection becomes our problem and not yours! Receivables financing puts money back into your pocket quickly, so that you can continue on with the task of running and growing your business. For a small fee, our collections professionals take over the process of securing payment, drastically increasing the chances that unpaid invoices are paid quickly!
