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.
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.
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:
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