Today’s hectic work environment and competitive economy can push any business to the ground if the latter runs out of money. This makes it more important than for any business to get paid by their clients. Accounts receivable is what keeps a business floating. Because cash is important, a business can use their receivables to ensure their cash flow is stable at all times. To make sure your accounts are managed properly, consider the tips below:
Build a Good Relationship with Clients
A business’ relationship with their clients must be solid. Happy clients are less likely to skip payments. Customers who have built a strong connection with a business may not do anything that will harm the relationship.
Offer Several Payment Options
To make clients pay on time, give them multiple payment options that are comfortable for them. Consider PayPal or credit cards. As you issue an invoice, remember to include links to electronic checks, credit cards or wire transfers to make it convenient and satisfying for your customers to pay what they owe to your company.
Establish a Credit Policy
It is necessary for any company to impose a credit limit to their clients. They should not spare any overdue clients especially if they make skipping payments a habit since this can negatively affect the cash flow of the company. It is equally essential to use credit limits for new customers and clients who request for credits.
Hire a Factoring Company
In terms of accounts receivables, the most difficult aspect is usually collection. Factoring companies can help your business avoid making multiple calls to demand payments of overdue invoices. Factoring companies can pay a big chunk of an invoice’s amount for you to use up for your daily operations and collect invoice payments from your clients. Just make sure though that you understand how reserve accounts work.
For instance, if the factoring company sets an 80% advance rate, you will get 80% of the accounts receivables right away. The remaining 20% is held by the factoring company in reserve until the invoice is paid. However, not all factoring companies hold reserve accounts so make sure you get clarification from the company. Other companies advance the entire invoice amount at the time of purchase.
If you are looking to consider accounts receivable factoring, make sure you read the entire agreement many times before you sign anything. Be clear of anything you are not sure about. Also, it makes sense to let another person you trust read the factoring contract.