Conroe, Texas business attorney offers 10 tips for collecting accounts receivable
If you are a small business owner, you don't need a lawyer to tell you that collecting your receivables is important. You are doubtless well aware that cash flow problems are a major cause of small business failures. Here are 10 tips that may help you keep the cash flowing in your small business.
- Put your payment terms in writing. Make sure they are stated clearly. They should be included in your sales contracts and written on your invoices.
- Bill promptly. The sooner a customer gets a bill or invoice, the sooner the customer is likely to pay you.
- When completing a lengthy project, bill at regular intervals. Customers will find it more palatable to pay smaller frequent bills, than one large bill at the end. Consider including brief progress reports with your bills to show customers the value of the work you have been providing.
- Bill correctly. Make every effort to avoid invoicing errors which can antagonize customers and cause payment delays and lost business.
- Monitor the age of receivables. Install software that generates daily accounts receivable aging reports so that you can quickly identify and monitor delinquent accounts.
- Establish and stick to credit limits. Determine how much credit you will extend to each customer. Do not let delinquent balances build up so high that the customer will never be able to pay the entire bill.
- Take immediate action. Do not let delinquent accounts slide. The longer you ignore a delinquent account, the less likely you are to get paid.
- Develop and follow a procedure for dealing with delinquent accounts. One suggestion is to begin with a friendly phone call to the customer. A phone call will give you the opportunity to find out the reason for a late payment. There could be a problem with your product or service that you can rectify. The customer will appreciate your attention and may reward you with immediate payment, continued business, and referrals. If the customer is having his own cash crunch, consider offering a payment plan. Try to get the customer to promise a payment by a specific date.
- Follow up. If the customer has not paid within the time agreed in the first call, call again or write. This time be a little firmer. If a second contact produces no results, politely inform the customer that you send delinquent accounts to collection.
- Turn the account over to collections. If three reminders yield no results, consider professional help. A collection agency is appropriate for smaller amounts, while you may want to consult an attorney for larger balances.
Contact the Peterson Law Group