5 Ways to Speed Up Payments on your Receivables

5 Ways to Speed Up Payments on your Receivables

Receivables don’t have much value if they aren’t turned into cash.

Your company really needs to keep tight control on its invoices outstanding so you can get an accurate picture of the receivables situation and take steps to improve the turnover of those accounts.

Here are five steps that can help you speed up the collection process and motivate your customers to keep their payments timely:

 

1. Conduct an accounts receivable “aging” on a regular basis, ranked by the invoice date, not the statement date.

For example, suppose you ship merchandise with an invoice on the first of the month. Invoice aging will correctly show that, by the end of the month, the account is 30 days old. If you age your accounts according to the statement date, the report will incorrectly show that the account is current.

Aging gives you not only a better handle on how long accounts are overdue but also the dollar amount of your company’s receivables outstanding.

2. Regularly reconcile the accounts receivable ledger with the general ledger.

3. Offer discounts for prompt payment and be sure to keep tabs on which customers receive this incentive. Many companies continue providing discounts to customers whose payments miss the deadlines set for the special deals. This hurts cash flow and chips away at the bottom line.

4. Give customers credit ratings and distribute those ratings to the appropriate departments in your company. This includes sales, customer service and data processing. If you revise a customer’s credit rating, adjust every department’s records accordingly.

5. Train your sales force to accelerate collections. For instance, an associate can tactfully remind an existing customer of an outstanding bill before selling that customer another product or service. Consider giving your sales team the leeway to reduce late fees or past-due interest charges in exchange for payment on the spot. Instruct your employees to be fair, consistent and polite in order to maintain a positive future relationship with customers.

For future sales, you may need to take steps to change the way customers pay. If you are selling products, consider requiring a deposit at the time of delivery or before, to help keep your cash flowing. In the worst case, you may need to demand full payment on delivery. If you are selling services, ask for progress payments according to a written contract.

MKS&H’s professionals are prepared to work with you to meet your business challenges in this area and achieve the best possible outcomes. For more information, please talk with your MKS&H representative or contact us at 410.296.6200.

© 2015


About MKS&H:

McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by advising them regarding their financial, technology and human capital management needs.

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MKS&H

MKS&H

MKS&H is committed to providing personalized tax and accounting services while developing a deep understanding of you, your culture, and your business goals. Our full view of financial systems and the people behind them allow us create and evolve the best solution that will help you and your business thrive. The accounting experts and consulting professionals at MKS&H work together to help you achieve the financial results you want.

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