Whether you’re running a small business or a large one, it’s essential to get paid on time. With a good accounts receivable turnover (ART) ratio, you’ll meet your fixed costs more efficiently because of your smoother cash flow. On the other hand, a poor ART ratio can exert excessive pressure on your enterprise. Here are a few ways your business can improve its revenue collection.
1. Use Modern Software
By investing in top-of-the-line accounting software and invoice generators, your business can ensure that it’s paid on time. Look for software that’s robust, yet affordable and easy to use. Cloud-based systems can help you access data from anywhere, while features such as automated bank feeds can save you time.
2. Insist On A Contract
Have your customer sign a professionally written contract that spells out the terms of the transaction. You can incentivize early payments by offering discounts and discourage late payments by charging late fees.
Many customers will gladly pay you earlier for a small discount. And late fees will show that your business is serious about getting paid on time. You can also use late fees as a bargaining chip if necessary.
3. Invoice On Time
Don’t forget to send an invoice as soon as your product is delivered. If your invoice is sent late, then your customer will take even longer to respond. If your customer hasn’t paid on time, then send polite reminders at regular intervals.
4. Offer Multiple Payment Options
While some people prefer conventional payment options such as cash, checks, and bank transfers, many customers prefer convenient payment options. Partner with a payment gateway so that your customer can quickly pay with their credit card or debit cards.
5. Remain Professional
Regardless of whether your customer’s payment is late because they’ve skipping town or if they need more time, keep your communication professional. Threats, shouting, and harassment rarely encourage delinquent customers to clear their dues. Poor communication can also damage your reputation.
If your long-standing customer is suffering from temporary cash flow issues, then offer to extend the payment deadline. Alternatively, if you can present them with more manageable options by dividing their debt into installments.
On the other hand, if your customer isn’t responding or simply refusing to pay, then it’s important to act quickly. Statistically, a debt grows harder to recover with time. Instead of wasting your resources chasing revenue, trust commercial collection experts to recover your debt efficiently.
The right commercial collection agency will clear your outstanding A/R while preserving your reputation. They can usually do so with official demand letters. Companies are generally happy to pay their dues when they realize that their credit rating is on the line. A company with a bad credit history will find it challenging to attain loans and perform other transactions.
These are some of the ways you can boost your payment collection process. Remember to research your customer before extending them credit. If their reputation is taking a hit in the business community, then they may struggle to pay you for your services. A little vigilance and diligence can significantly improve the effectiveness of your receivables collection process.
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