It’s better to stick with treats than tricks when it comes to money. Does it ever feel like dealing with some accounts is a game of trick-or-treat? Like you just aren’t sure what you’re going to get…another excuse or a check? That’s not to say that most clients aren’t honest human beings. The point is this: the 80-20 rule holds true for accounts receivable management. Despite the forthrightness of the 80%, there’s a stubborn 20% out there (maybe even less) that either doesn’t get it or is simply struck by a terrible and recurring bout of bad luck.
With that in mind, and with Halloween on the horizon, we wanted to go over three treats of the trade that will make a difference for your business as we enter the holiday season of the year.
How To Take Payment From A Client:
Trick: Invoices and personal checks: With some clients and in some industries this is simply unavoidable. But when it’s possible to use credit cards, we recommend it. Personal checks bounce, rely on the client’s memory (sometimes unreliable), and have a tendency to be late. This costs you time and money.
Treat: Keeping a credit card on file and/or coordinating for automatic payments: The huge advantage to credit cards is that all of the risk is passed onto the credit company. The downside is that typical merchant service costs are around 3% of the amount billed. We recommend either writing this up as a legitimate cost of doing business, or passing it onto your customer as a surcharge.
Outsource Your Accounts Receivable:
Trick: Do It All Yourself: Especially for smaller companies, the best way to grow is typically by focusing on your particular deliverables set (the products or service offerings that you specialize in). It is much simpler to keep a partner agency on a small retainer or even simply as an available resource in an “as-needed” basis to work debt collection issues as they come up.
Treat: Outsourcing: taking advantage of a partner firm’s in-house expertise in ARM is especially useful for smaller companies that don’t have enough month-to-month work to keep a full-time staff on board.
Bulletproof Your Processes:
Trick: Shoot from the hip: One common source of inefficiency (especially in young organizations) is an inconsistent manner of handling the same issues that seem to come up from time to time. Being able to successfully scale your company depends largely on your ability to put in place processes that are repeatable and that provide a starting place from which to iterate. Shooting from the hip and “just figuring it out” will work for start-ups for a while but over time it becomes inconsistent and unsustainable.
Treat: Put a definite process on paper and follow it: Managing your accounts receivable is no different than any other company process. There is a right way and a wrong way to follow-up with delinquent customers. Fortunately we have written an entire ebook on this topic: “Bulletproof Your Accounts Receivable.” The ebook is completely free and provides you with five tips to streamline your internal collections processes and improve the financial health of your business. You can download it here.
Those three “treats” are a great place to start and hopefully they provide you with some interest in how you can improve your accounts receivable processes. For more information visit National Service Bureau at our website. Very best to all of our readers and Happy Halloween!