The savviest business owners know to not only watch sales and profits but to shape up their practices in accounts payable and receivable. The following tips may help you do the same.
Offer a variety of payment options
On the receivable side, it’s important to collect cash as quickly as possible because unpaid invoices won’t pay the bills. One way of speeding up the process can be to offer a variety of payment options.
Next to cash, perhaps the easiest and most convenient option is to allow customers to use a variety of charge and credit cards. No matter how long customers decide to take to pay off debt, you receive cash more quickly.
For some businesses where payment is due when services are complete, there are ways to receive money before the job is done. Consider whether you are comfortable asking for a partial payment upfront. For example, if you have to lay out cash for expensive materials before a job is done, you might offer the customer a discount if they agree to pay for materials in advance. Be creative and find options that can help serve you and your customer.
For those serving business accounts, you may consider offering customers terms of 30 days. In a slowing economy, it’s common for these customers to push the limits of these terms. Consider offering a discount for early payment, and try encouraging credit card payments from business accounts.
Collect promptly
For businesses dealing with business accounts, you can look for ways that can help improve your collections process by understanding your customers’ billing preferences and procedures. Be certain your invoice contains all appropriate information, such as your customer’s purchase order number or your vendor number, and be sure to send the invoice to the appropriate contact. Mailing to a wrong address or to the wrong contact can add days to the collection cycle.
It’s also important to designate an individual who actively keeps an eye on accounts receivable. Hire or assign a reliable bookkeeper or accountant, even on a contract basis, to handle accounts receivable functions. His or her job will be to approve credit, if applicable, make collection calls, receive payments and make deposits.
Get the most from your money
Maintaining the balance between accounts payable and receivable isn’t always easy, but with concerted effort and some common sense strategies, you can achieve cash on hand and peace of mind.
David Shapiro is a Vice President for American Express OPEN.
