If you use accounting software every day to handle your books, on top of managing the day to day operations, you might not be leveraging all the features that will ensure your business is optimizing cash flow. Any accounting software has an accounts receivable (AR) module that can improve collecting payments from clients. Common pain points of the entire AR process can be avoided by simply using your current accounting software to it’s fullest capacity.
Many small businesses struggle with collections, that combined with a lack accurate accounting records, and you’ve got a mess on your hands. There are four accounts receivable functions you likely already have in your software and once activated they can make big difference to the bottom-line.
Recurring Billing Support
Recurring payments are common. If you are in a situation where you can set up recurring payments for clients via ACH debits or some other electronic method, you should do it. It helps promote higher collection rates while minimizing the time spent on future collection efforts. If you’re providing good enough services/products to your clients, you’ll want to ensure their payments are coming in on time, so you can spend more time focusing on running the business rather than dealing with collections issues.
Billing/Collection Email Integration
If billing your customers isn’t as simple as you’d like, then you’ll need to establish some level of a billing and collections process. If a customer’s due date is arriving, you’ll want to send a reminder email. If they’ve paid on time, they will likely desire an invoice. If they have not paid, you’ll have to begin the dreaded collections process of sending past-due notices.
Leverage your AR software to create and send emails. It will go a long way toward improving your collections process. This eliminates the need to copy data from the program and paste/attach it into an email. The ability to have this communication at your fingertips as soon as you need it will let you breeze through any reminder emails or Invoice-paid emails that you provide to a client as a courtesy. Your AR module may even take care of auto-populating certain fields for you or re-using email templates, which eliminates the time spent drafting any emails.
Flexible Interest & Late Fee Application
No business owner wants to deal with clients not paying them for their services on time, just as no business wants to be late providing services for clients. Dealing with chronic late payments can be a bad situation and sever relationships if it’s not handled delicately. It can also affect your performance and mess up cash flow. However, it’s a reality when customers don’t pay time.
Most accounting software will allow you to set up interest terms, which specify how much the customer will be charged in late fees if payment is not paid promptly. Usually, these are spelled out in any contracts you may have a client sign, but it’s important to have these terms spelled out clearly in all invoices as well, which will help temper the expectations to a customer if they become delinquent. If a payment has not been recorded past a scheduled due date, your software likely has the ability to automatically calculate any late fee and add it to a newly created invoice.
Early Payment Discounts
If you can punish a client for late payment, why not reward them for paying early? Allowing early payment customer discounts for Net 10 or Net 15 payments can be a great way to improve client relations, cash flow and also could be a selling point in attempting to establish the value of your services with a new customer. For a job well done, customers should be happy to pay you on time. But with an added incentive to pay ahead of time, they’ll be thrilled to do so if you’ve been providing quality service or products.
Talk to your accountant or bookkeeper to help you set up these features in your accounting software, if you don’t feel comfortable handling it. It could go a long way to helping improve your cash flow and invoice management.
About the Author:
Russ Davidson is a Digital Marketing Specialist at Software Connect, a company providing free software recommendations. Since 1996, they’ve helped thousands of companies find the best solution for their needs.