• Dagley & Co’s Six Best Practices in Billings and Collections

    5 November 2015
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    Get organized, and get paid! Image via public domain

    Have a small business? One area where you can improve cash flow is in billings and collections. Getting paid late can often hurt a business, and there are ways to get paid faster so you can keep growing. Here are six best practices that can make a real difference in your cash balance at the end of every month.

    1. Get it right.

    One legitimate reason for nonpayment is a confusing or inaccurate invoice. Make sure your invoices spell out in clear, plain English what was purchased, the price, when payment is due, the customer’s PO number, when it was shipped, to where it was shipped, and any tracking number. We highly recommend QuickBooks for all of our clients for easy invoicing and payments.

    You may also want to tighten your sales process. Don’t start work without a formal PO from your business customers—many companies won’t pay against a verbal PO. When you receive a PO, make sure that it matches your quotation. Companies often put their payment terms on their paperwork, so if your customer tries to play this game, resolve any discrepancies before you start work.

    Finally, make certain every shipment and invoice is 100% correct. Set up processes to assure the customer gets exactly what was ordered and that invoices are equally accurate.

    2. Get it out.

    See that four-day-old pile of shipping papers waiting to be invoiced? That’s a pile of cash you can’t collect.

    Set a goal to issue all invoices within one working day of the ship date or completion of work. If your team struggles to meet this, give them the tools and/or manpower to make it happen. And if an invoice gets held up internally, make sure your supervision is immediately notified so the problem can be quickly resolved.

    To further speed payments, try to invoice your customers by email. Some won’t accept emailed invoices, but getting even a portion of your billing done electronically will help overall cash flow.

    3. Get it to the right person.

    How many times has one of your employees called about a past-due payment and been told “we didn’t receive your invoice” or “that needs to be approved by the department manager”? It’s another game, one that can take weeks to play out. As part of getting an accurate customer PO, make sure your sales staff gets a valid address for invoicing.

    Large sales deserve special attention. Where applicable, have your salesperson get the contact information for the customer employee that will approve payment. This might be a department or plant manager and maybe even the business owner. Also get the contact information for the customer’s finance-side people (accounting manager, accounts payable clerk), who will cut and approve the check. When your invoice goes out, make sure they all get a copy.

    4. Get it sooner.

    Offer a discount for early payment—for example, 2% off for payment within 10 days. Not all of your customers will take advantage of this, but it’s a great way to pull cash in.

    5. Get friendly.

    The best way to get paid on time is to build a positive working relationship with your customer before the money is due.

    Have your salesperson call his or her customer contacts shortly after the invoice goes out. Confirm the product has been received or affirm that your assignment is now complete. Ask them if they’re satisfied with your work, what you can do better to improve, and if they’ve received your invoice. This communicates (in a nice way) that it’s time to start the payment process. If these calls uncover problems, it’s an opportunity to address them on the spot as opposed to when payment is past due.

    Your employee responsible for collections should also make a call—in this case, to the customer’s finance-side people. Your employee should confirm the receipt of your invoice, remind them of any discounts for early payment, and check whether there are any administrative problems with the document. They should not ask for a payment date. If possible, they should also try to get to know their counterparts. A simple “How’s the weather where you are?” is a great opening that can lead to a long conversations about, well, everything. Your customer’s payables team can be your best friend later in the collections process, but it won’t happen if you have not built a working relationship.

    There’s one other person who needs to get friendly: you, the business owner or general manager. As your company develops large customers make sure you get to know your customer counterparts. A phone call from you asking “How’s my team doing?” is a great way to initiate a conversation and assure customer satisfaction. For very large projects, make a face-to-face visit. It will pay off later. If the time comes when a payment problem needs to be escalated, you will have an established relationship on which to call.

    6. Make it fun.

    Some companies take the “get friendly” notion to the next level. From putting silly “Thank You!” notes on their invoices, to handing out promotional swag, to sending little stuffed animals for on-time payment, it’s amazing how these goofy gimmicks can change the atmosphere around the collection process.

    You want your customer to smile and shake his head as he signs the check to pay your bill. And if the day comes when your customer needs to decide whom to pay and whom to put off, chances are he will pay you first.

    In Closing

    What about the actual collections process? Good companies contact their customers if a payment is more than five working days late. You should do the same.

    What’s different is that you’ve laid the foundation for a successful endgame. Any excuses for non-payment have been addressed. Your people know whom to call, and you have working contacts who will give you straight answers. Above all, you’ve strengthened the relationship with your customer and have built a basis for future business.

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  • Eight Ways to Get Your Customers to Pay On Time

    16 June 2015
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    You shouldn’t have to wrestle your customers for payments owed to you. Here are some tips for smooth invoicing. Image via public domain.

    A wise businessman once said, “a sale isn’t a sale until you’ve collected payment — it’s just a loan.”

    If you’ve been in business for any length of time, you know how true this quote is. Many small businesses that were profitable on paper have gone bankrupt waiting for payments from customers to arrive.

    This makes accounts receivable (AR) collections one of the most important tasks for small business owners. Unfortunately, it’s also one of the most neglected. Here are eight strategies you can implement to help boost your AR collections and improve your cash flow:

    1. Make sure your invoices are clear and accurate. If invoices are vague, ambiguous or flat-out wrong, this is sure to delay customer payments as they call to try to get things straightened out. In short, you don’t want to give customers a reason not to pay your invoices quickly. We recommend QuickBooks to our clients for clear, accurate invoicing.
    2. Create an AR aging report. This report will track and list the current payment status of all your client accounts (e.g., 0-30 days, 30-60 days, 60-90 days, 90+ days). This will tell you which clients are current in their payments and which clients are past due so you know where to focus your collection efforts. To go on our earlier point, QuickBooks is great because it automatically does this for you.
    3. Give a bookkeeping employee responsibility for AR collections. If collecting accounts receivable isn’t the main responsibility of one specific employee, it will probably fall by the wayside as other tasks crowd it out. Therefore, make one of your bookkeeping employees primarily responsible for this task.
    4. Move quickly on past-due accounts. Don’t delay taking action once a client’s account reaches the past-due stage. Studies have revealed that the likelihood of collecting past-due receivables drops drastically the longer they go uncollected. Your designated bookkeeping employee should start making collections efforts the day after an account becomes past due.
    5. Plan your collections strategy carefully. Decide ahead of time how you will approach late-paying clients. For example, a friendly reminder call and/or email from your designated bookkeeping employee is probably a good first collection step. If this doesn’t get results, you can proceed to more aggressive steps such as sending past due notices and dunning letters.
    6. Consider offering a payment plan. Sometimes, customers have legitimate reasons why they can’t pay their invoices on time. Maybe the customer is having temporary cash flow problems and wants to pay you but simply can’t right now. In this scenario, you might consider working out a payment plan that allows the customer to pay the balance due over a period of time. The agreement should be made in writing and signed by both parties.
    7. Hire a collection agency. If all of these steps fail to resolve a collection problem, you might have to turn to a collection agency as a last resort. However, this is a serious step that should not be taken lightly, since it will probably jeopardize your relationship with the customer. Decide whether or not collecting the past-due amount is worth possibly losing the customer. Also keep in mind that the collection agency will keep a large percentage of the amount collected.
    8. Hire Dagley & Co. We are here to help if you have customers that are falling behind. Sometimes it’s best to have a third party go after late bills, and we can handle the correspondence in a way that is professional so that you can keep your personal relationship with your clients and customers upbeat.

    Very few small businesses can afford not to make AR collections a top priority. Following these eight steps will help you improve your collections — and these improvements will boost both your cash flow and your bottom line.

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  • Tips For Customizing QuickBooks For Your Company’s Needs

    16 February 2015
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    Quickbooks

    Dagley & Co. has clients all over the world, and one of the tools that makes this easy is the wonderful, versatile accounting program we all know as Quickbooks. QuickBooks is ready to use when you install it. But with a few adjustments, you can change its settings to make it work the way your company needs it to.

    There are some features that all small businesses need in their accounting software. Everyone needs a Chart of Accounts and a good set of report templates. There must be tools to bill customers and to document income and expenses. Some companies need payroll management, and some need the ability to create purchase orders. These days, many businesses want to accept payments online.

    But what does your company need? It’s unlikely that you would use absolutely every feature that QuickBooks offers, but you need to make sure that every tool you want to use is set up properly.

    If you’ve been using QuickBooks for a while, you may have been directed to the Preferences window already (accessible by clicking on Edit | Preferences). If you’re just starting out with the software, it’s a good idea to acquaint yourself with the most important elements contained there. Here are some of them.

    figure 1

    Figure 1: QuickBooks’ Preferences window. Some features are already turned on or off by default, but you can change their status.

    Accounting
    Click on the Accounting tab in the left vertical pane, then on the Company Preferences tab. Here, QuickBooks wants to know whether you plan to use account numbers. It also offers the option to turn on class tracking, which lets you define classes like company locations or divisions, or salespeople. Not sure what you should do here? Please ask us.

    Desktop View
    Options here involve usability and visibility issues. Getting them right can save you time and frustration. For example, under the My Preferences tab, you can choose between a VIEW that displays only One Window, or one that keepsMultiple Windows open. Click on the Company Preferences tab to turn specific features – like Payroll and Sales Tax — on and off.

    Finance Charge
    Should you decide to apply Finance Charges to late payments, for example, please let us go over this feature with you. We’ll explain how it is set up and how it works in day-to-day accounting.

    Items & Inventory
    This is critical: you must visit this screen if you will be buying and selling products. First, you need to make sure that the box in front of Inventory and purchase orders are active has a check mark in it. If not, click in the box. Also important here: QuickBooks can maintain a real-time inventory level for each item you sell so that you neither run short nor waste money by stockpiling. Check the box in front of Quantity on Sales Orders if you want the software to include items that appear on sales orders in the count. Also, do you want a warning when you don’t have enough inventory to sell (as you’re filling out an invoice, for example)? We can explain the difference between Quantity on Hand and Quantity Available; it’s rather complex.

    Figure 2

    Figure 2: Some inventory concepts may be unfamiliar to you. If you’ll be buying and selling items, let us walk you through this section.

    Payroll & Employees
    Payroll is integrated with QuickBooks, but it’s so complex that it almost acts as another application. If you’re planning to take this on yourself, some training will be necessary.

    Reminders
    Unless you have a very simple business or an extraordinarily good memory, you’ll probably want Quickbooks to remind you when you need to complete certain tasks. Click Reminders | Company Preferences to see the lengthy list of events that QuickBooks supports, like Paychecks to Print, Inventory to Reorder, and Bills to Pay. You can have the software display either a summary or a list of what needs to be done, and you can specify how many days in advance you want to be alerted.

    Sales & Customers, Sales Tax, and Time & Expenses
    If your accounting workflow includes tasks in any of these areas, you’ll need to visit them to turn features on and make other preferences known.

    You probably won’t need to have absolutely every feature turned on from the start. But as your business grows and changes – and we hope it does – you can always revisit the Preferences window to let QuickBooks know about your new needs. We hope you’ll let us know, too.

    Image via public domain

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  • QuickBooks Tips: 5 Ways To Get Your Clients To Pay Your Business More Quickly

    29 September 2014
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    QuickBooks Invoice

    Accounts receivable requires constant monitoring. As satisfying as it can be to dispatch a group of invoices, any business owner knows that it’s going to take some work to bring in payment for at least some of them. It can be a frustrating process, but there are some ways to get your clients to pay their bills more quickly and more easily.

    There are so many reasons why QuickBooks is the standard accounting and invoicing tool of almost all of my clients. It provides easy and reliable record keeping, and it helps us at Dagley & Co. manage the finances of your business with the click of a button (we work with clients all over the world). However, there is still a lot of work to do to collect on those invoices. If I were to ask five of my small business clients to name the top roadblocks they faced in their quest for ongoing profitability, it’s likely that all five would point to slow payments – save for those of your in retail who are paid on the spot (lucky you!).

    By using QuickBooks’ tools and complying with accounting best practices, you’ll be more confident during the invoicing stage that what you’re owed will actually be in your bank account in a reasonable amount of time. Here are five things that we suggest:

    1. Let customers pay invoices electronically.

    Figure 1: You’re likely to get paid faster if you let customers pay electronically when they receive an invoice. Go to Edit | Preferences | Payments | Company Preferences.
    Figure 1: You’re likely to get paid faster if you let customers pay electronically when they receive an invoice. Go to Edit | Preferences | Payments | Company Preferences.

    It’s 2014: people have stopped carrying checkbooks and are accustomed to using their mobile devices to pay for merchandise. It’s as though online and electronic billing are required. Whether or not you know it, you’re probably losing some business if you don’t have a merchant account that supports credit and debit card payments, and possibly e-checks.

    If you have an online storefront, you’ve undoubtedly been accepting plastic for a long time now.

    Not many shoppers want to place an order on a website and hunt for envelopes and stamps and blank checks to complete it. If you invoice customers, it’s just as critical that you allow them to remit payment ASAP.

    Not set up with a merchant account yet? Ask a rep at QuickBooks to help you get started with the Intuit Payment Network.

    2. Keep a close watch on your A/R reports.

    Part of being proactive with your accounts receivable is being vigilant and informed. Create and customize A/R reports regularly. When you customize your A/R Aging Detail report, for example, in addition to the other columns that you include, be sure that Terms, Due Date, Bill Date, Aging and Open Balance are turned on (click Customize Report | Display and click in front of each column label).

    You should also be looking at Open Invoices and Collections Report frequently, or assigning someone else to monitor them closely. QuickBooks can help here by creating more complex financial reports periodically, like Statement of Cash Flows.

    3. Send statements.

    Figure 2: In this window, QuickBooks wants you to create filters to identify customers who should receive statements. Here, everyone with transactions that are more than 30 days old will be included.
    Figure 2: In this window, QuickBooks wants you to create filters to identify customers who should receive statements. Here, everyone with transactions that are more than 30 days old will be included.

    Invoices are generally the preferred way to bill your customers, and you should consider sending statements in addition when customers have outstanding balances past a certain date. QuickBooks sometimes calls these reminder statements. You’re not providing the recipients with any new information; you’re simply sending a kind of report that lists all invoices sent, credit memos and payment received.

    To generate statements, click Customers | Create Statements. You’ll see the window pictured to the left. You can send statements to everyone, a defined group or one customer, and you can define the past-due status that you want to target in addition to other options.

    4. Send accurate invoices the first time.

    This may be obvious, but double check your work! Few things will slow down your accounts receivable more than incorrect invoices. The customer can wait until payment is almost due to dispute the charges, which means that they’ll probably get another 15 or 30 days (or whatever their terms are) to pay the amended bill. Whoever is responsible for creating invoices needs to be checking and re-checking them. If it’s logistically possible depending on your workflow, have them verified by a second employee or ask us at Dagley & Co. to help.

    5. Offer discounts for early payment and assess finance charges.

    Offering discounts is a balancing act. You’ll be getting less money for your sale – even 5 percent multiplied by many customers can add up – but it may make sense financially for you to take a small hit in return for being able to deposit the payment sooner. We can help you do the math here.

    To offer this, you’ll have to set up your discount scenario as a Term option (Lists | Customer & Vendor Profile Lists | Terms List), as seen here in Figure 3:

    Figure 3: This Standard discount term gives customers a 5 percent discount if their invoice is paid within 10 days.
    Figure 3: This Standard discount term gives customers a 5 percent discount if their invoice is paid within 10 days.

    To make a customer eligible for the discount, open the Customer Center and double-click on a customer, then on Payment Settings | Payment Terms.

    You might also want to be assessing finance charges. The revenue you bring in from finance charges will probably be negligible. Sometimes, just knowing that a late payment will be more costly may prompt your customers to settle up in a timely fashion.

    Whatever approaches you choose to accelerate your receivables, be consistent. If any of your customers should compare notes, you want to be regarded as being firm but fair.

    Images via QuickBooks/Public Domain

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