Updated: May 18
Good accounts receivable management is one of the best ways to get paid quickly. But sometimes, customers don't pay their bills on time, which can be frustrating. Late or unpaid invoices can cause cash flow issues and strain customer relationships. That is why you need to have a solid strategy in place to make your collection efforts count.
In this blog, we will provide you with the top 8 ways to improve your accounts receivable collection process. By following these strategies, you'll be able to collect debts owed to your company efficiently.
What Are Accounts Receivable Collections?
First, let's define what "accounts receivable collections" means. It is the process of collecting debts owed to your company by customers who haven't paid for the work you completed for them. Without proper management, you risk not having enough cash to keep your project running.
Don't let past-due accounts receivable hinder your business's growth. Make sure you have a solid strategy in place to manage your accounts receivable collections and get paid what you're owed!
Top 8 Accounts Receivable Collection Techniques:
1. Create an Accounts Receivable Aging Report:
An AR Aging Report is a critical collection tool for tracking unpaid payments. It lists your invoices based on date ranges, allowing you to see which invoices are overdue and how far behind they are to require immediate attention. With an AR aging report, you can easily identify late-paying customers and analyze how they are paying you.
2. Automate Your AR Workflow
AR process automation saves time and reduces data entry mistakes. You can use accounting software to automate tasks like creating invoices, sending payment reminders, and recording payments. This can help you simplify the way you collect AR and make sure that all tasks are done correctly and on time.
With CCA's AR workflow in place, you can track balances and better monitor when customers need to pay their invoices.
3. Follow Up on Overdue Payments
The longer debts go unpaid, the less likely it is that they will be recovered in the future. For that reason, the sooner you are aware of any past-due invoices and act on them, the better. Make sure you reach out as soon as possible to let them know about the due dates and penalties. Then help them get back on track with their payments.
4. Be Flexible With Payment Plans
One of the best ways to get late-paying customers on track again is to make it easier for them to pay. Let them work on a payment plan with convenient payment options. You can also offer them discounts as incentives to encourage them to pay off their balances early. It's also important to write down the plan and its terms and have everyone sign it.
5. Optimize Convenient Payment Options
Before you start to follow up and collect a late payment, make sure your customer received your invoice. Once you have confirmed that the invoice was received, you need to make it easy for your customer to pay you promptly.
Electronic billing and other options (like credit cards, ACH, etc.) make paying off debt easier and faster.
6. Ensure A Personalized Customer Experience
It is essential to create a personalized customer experience to improve payment collection. Although automation is helpful in many aspects, over-relying on it for payment reminders can push customers away. The key is finding a balance between automation and personalization.
Consider using a receivable management plan that lets you collect payments automatically and in a way that feels personal. By personalizing how you talk to customers, you can find out why they don't pay and maintain a good relationship with them, which will build trust and loyalty over time. This approach improves payment collections and builds long-term customer relationships.
7. Issue Good Invoices That Increase Payments
Your collections will be greatly improved if you have an effective invoicing system. It is important to make sure your invoices are correct, professional, and have all the necessary details. To increase your chances of receiving payments on time, invoices should be sent early and clearly communicate the due date and amount due.
If you are struggling with creating accurate and professional invoices, our CCA's AR services can help. We can make sure that payments are made on time by using consistent formats, sending invoices on time, and following up regularly.
8. Avoid Delay Like You Want to Avoid Bad Debts
To improve your chances of recovering overdue debts, minimize delays and act quickly when bills become overdue. Putting off sending notices and reminders only makes it more likely that the debt will not be paid.
Instead, it is essential to take action as soon as possible. Send notices within a day of when a debt becomes past due to cut down on the risk of losing the opportunity to collect the payment.
By acting quickly, you can show your customers that you take their payments seriously and want to avoid miscommunications.
If you want healthy cash flow and good customer relationships, you need to improve your accounts receivable collections. If you use the top 8 tips in this blog, your a/r collections efforts will be much more successful.
Now you know how to improve collection processes, such as by making your payment terms and reminders clear. The best ways to get the most out of your A/R collection efforts are to automate your A/R workflow and review your A/R aging reports regularly. If these 2 topics seem complex to you, leave it to the experts at CCA.
Our accounts receivable services can handle everything from A/R aging reports to payment collection, giving you more time to focus on your business's growth. With CCA, you can rest assured that your accounts receivable are managed efficiently and that your cash flow is optimized. So why not let CCA take care of your A/R needs and watch your business thrive?