Being an entrepreneur sometimes means wearing several hats, often including those of billing and accounts receivable (A/R). The occupational hazard of being pulled in several directions can make controlling your outstanding invoices a challenge. Not only that, but companies can become so focused on getting new business that collecting overdue receivables is easy to put off.

The reality is that invoicing your customer is only half the equation; you still need to get paid. I don’t consider a file closed until funds have cleared the bank. Controlling your accounts receivable is essential to maintaining a healthy cash flow—and for your company’s long-term survival.

Here are six important ways to keep your A/R under control and improve your cash flow:

1. Establish Clear and Firm Billing Policies

One frequent cause of out-of-control receivables is when billing policies are not clearly communicated to customers. Whether payment is due “upon receipt” or “net 30,” you can’t reasonably expect customers to comply unless they are aware of your terms. It’s also important to clearly state any applicable fees if the account is not paid in full within the timeline (and to be enforceable, late fees generally must be part of your initial agreement). Consider requiring a deposit from new clients before delivering your product or services.

2. Hawk-Eye Your A/R Aging Report

I strongly advise getting in the habit of reviewing your accounts receivable on a regular basis. Developing this habit early on can reduce your outstanding A/R balances and bring to light any problem accounts.

In addition to regularly reviewing your ageing receivables, you should also have a policy defining next steps, such as when to send follow up email reminders or make a polite “reminder” phone call. Keeping on top of all overdue accounts receivable is central to sustaining positive cash flow.

3. Go Electronic

While sending invoices by mail remains popular, it delays receipt of your invoices—and thereby payment. If you want to accelerate your billing process, consider emailing invoices with an accounting platform such as Wave or Freshbooks. In addition to emailing invoices, these apps can send recurring bills and automatic reminders, taking more work off your plate.

4. Decrease Payment Terms

Another benefit of emailing invoices is that it allows you to shorten your payment terms. Rather than the usual net 30 billing, the immediacy of email invoicing is making “payment due upon receipt” more acceptable. This small yet effective change means you collect on bills faster, resulting in improved cash flow.  Even late bills tend to be paid sooner when payment is due immediately because you establish your invoice as a high payment priority.

Another often-successful tactic is offering clients a small discount if they pay their bill before the due date. Who doesn’t like a discount? Send your invoices immediately upon delivery to further emphasize time-sensitivity and keep the sale fresh in clients’ minds.

5. Offer a Choice of Payment Methods

If you want to be paid on time (or even before the due date) offer your customers a variety of ways to satisfy their debts. Although some clients continue to pay with cheques, a growing number prefer to use Apple Pay, PayPal, electronic funds transfer (EFT), or a credit card. It’s a helpful practice to state your payment options on your invoices.

6. Know to When Call the Collection Agency

If you are still waiting for a customer to pay even after a few reminder emails and phone calls, it’s time to send the file to a reputable business debt collection agency. After all, unpaid receivables give you nothing but grey hairs, and the older the account, the less likely it is to ever be recovered. In fact, the statistical probability of collecting ageing debt diminishes faster than most entrepreneurs think.

Don’t Put It Off

Effective management of accounts receivable is pivotal to the success of any business, so don’t wait to implement a firm policy on overdue accounts, along with the steps above that suit your operational structure. Strong A/R practices foster a healthy cash flow, keeping your business operating and profitable—so you can focus on growth and the enjoyment of being in business!

Visit MetCredit on social media today!