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Mastering the Art of Accounts Receivable Will Open Your Companies Financial Flood Gates.

There are few things more annoying than clients not paying you on time! Psychologically, it feels like a betrayal, a show of disrespect. You held up your end of the established exchange by delivering a quality product promptly or performing the service to the best of your ability. No wonder it’s disheartening when clients blithely ignore their part of the bargain. This is especially true in the case of small business owners who are often working personally with their client base. Can’t they understand your financial needs are just as pressing as theirs? You provide superior service, yes, but clients need to know this doesn’t extend to becoming their interest-free source of credit.

Practically speaking, when your expected income unexpectedly ends up not forthcoming, it totally disrupts your business operations, often to a surprisingly large degree. How can you make executive decisions about business expenditures like capital purchases, even staffing, with no idea as to when expected financial resources will actually arrive? Chances are if people aren’t paying you on time, you’re not paying your contractors and suppliers on time either, which compromises your own credibility and peace of mind.

How many times have you complained, “It can’t go on like this!” You’re right; it absolutely CANNOT!

But how are you going to find the time to contact all the culprits? How are you going to find the right words to say in the right way that will guarantee invoices are paid ASAP while leaving your positive, interpersonal client relationships intact? You want your payments to come in, but it would certainly be best to avoid dealing with outside collections. What to do?

First off, establish a proven internal system to master Accounts Receivable. What are your terms of payment, 30days, 60 days, or upon receipt of the statement? What interest rate will you charge on overdue accounts, and when will it become applicable? How long will you let things slide before you revoke their credit? If applying penalties is not the direction you want to go, consider bonuses and incentives for early payment. Perhaps you could change to an electronic system for credit cards and e-transfers to make bill-paying easier for your customers. No matter the details of your process, you must communicate them clearly to clients and then administer them firmly and consistently. Everything needs to be crystal clear so there are no surprises.

Next, ensure that you have a specific series of timed communications going out to the client. Once the invoice has been sent, the first follow-up might be a week or two later. Send a congenial email to confirm receipt of the documentation and ask if everything is in order. If it’s applicable, you can even inquire as to the payment method they’re planning to use and when they plan to pay. As a gentle nudge to get them moving, ask politely if they need your help in any way. When payment is not in by the due date, you could email another friendly reminder outlining potential late charges. Add in a definitive call to action to pay in an immediate time frame. The next step would likely be a phone call, followed by as many more calls as needed, at regular intervals until your money is finally received.

Keep track of those payments carefully using detailed Accounts Receivable Reports.

These reports allow you to pinpoint patterns of continual delinquency. We’ve all experienced those problem clients who seem to somehow “lose” all your invoices. Then, to add insult to injury, after insisting that your accounting staff resend the paperwork, they take until the second coming to pay!!! And that’s only after 27 more reminder calls, wasting even more time and resources, as they continue to constrain your cash flow. Keeping careful records, you can easily see when it could be time to “fire” those high maintenance clients who actually consume more of your financial resources than their business brings in. Concentrate on your A-list clients, those clients who respect your time and effort and that not only make your business profitable but are a real joy to serve.

When you handle your Accounts Receivables kindly but firmly, people respond. They respect this show of courteous insistence as the mark of a serious professional. If you have difficulties being the “bad cop” in all of this, however, then it’s wise to assign the task to a trusted employee, or even your bookkeeper. We, at Preferred Client Services,  are happy to help. We routinely perform this type of service for business owners because we know how integral unimpaired cash flow is to any operation.

How do you reduce the stress of doing Accounts Receivable? 

Here are some suggestions from our experienced bookkeeping team on how to handle those inevitable Accounts Receivable Collection calls. Obviously, it’s crucial to never lose your temper and irreparably damage your working relationship. Even the smallest nuances, your word choices, for example, the tone of your voice, the emotion therein, even your ability to maintain control of the conversation can influence the outcome of your phone interaction.

If you’re in a snarly mood, the person you’re calling will pick up on that negative energy. Maybe you’re irritated because of an earlier frustrating conversation, you missed your morning coffee, or, you didn’t do the laundry last night and now you are forced to wear a thong under your control top pantyhose. Whatever the case, that negative tone in your voice will bring you unsavoury results, guaranteed. Conversely, a smile on your face will show in your voice, even if you have to force it. You want to develop a firm, authoritative, yet friendly tone for optimal results. Practice makes perfect, recording trial conversations to see how you come across to others will help you. These suggestions can build the confidence necessary to ace these especially important but delicate collection discussions.

Keep your end goal in mind, at all times, to avoid distractions. It’s important to keep to your agenda of securing immediate payment. Addressing the client by name reinforces your relationship. Hold their attention by asking open-ended questions allows you to get as much information as you can without being too demanding. Make sure you LISTEN to their response; your inattention can easily be sensed on the other end of the phone as well.

You’ll want to take notes, record any promises or relevant extenuating circumstances that will help clarify the situation for any subsequent phone calls. Choose your words strategically to align with your clients rather than choosing confrontational language, which could hinder your effectiveness. There’s a big difference between “I can understand how that would happen” and “That’s no excuse when you knew you owed the money”. If customers start complaining and blaming you, stay calm; remind them that you are just doing your job. Do your utmost to show empathy and compassion for their situation, and it will handily disarm their defensiveness. If their anger is completely out of control, politely end the call.

Only you know the situation in your business, the extent to which outstanding Account Receivables are impeding your success. It could be that collection calls are beyond the scope of your in-house staff and, if that’s the case, we’re happy to help. Our premier team of bookkeeping professionals is specifically trained for Accounts Receivable. Truthfully, it’s to your advantage to have us act as an objective “buffer” to deal with these awkward, potentially sour scenarios. Removing you and your team from any negativity felt by the clients can keep your thriving relationship alive and well. Rest assured, with Preferred Client Services on the job, your Account Receivables are definitely retrievable!