Receivables Management, also know as Accounts Receivable Management, is quickly becoming the hottest trend in small business finance and management. As both a phenomenal tool for business growth and cash flow, it’s quite wise to explore this concept and implement one of the available softwares for your business.
A New Frontier of Knowledge
As far as tools and technology go, Receivables Management is brand new. Most businesses use excel sheets or actual pieces of paper to keep track of invoices and payments. It’s an area ripe for improvement, as most American small businesses report problems collecting on past due invoices, as well as getting paid on time at all.
All signs point to an increase in Accounts Receivable as payment terms of net90 or greater become increasingly popular. Even the federal government has begun making efforts to address the receivables management problem with a new initiative called Supplier Pay, which required large companies to commit to more rapid payment terms (like net30) for the small businesses they deal with.
Delays in payment will cause your business to be short on much needed cash, especially when it comes to liquidity for immediate expenses. The status quo has been to turn to loans based on outstanding invoices, however the fees related to this service eat away at a business’ bottom line. With Accounts Receivable Management, businesses can keep more of their profits, confidently collect more on time payments, and increase their overall cash flow.
The Power of Organization
It’s important for businesses to see which invoices are nearing their due date, which are moderately past due, and which invoices are now delinquent. Each scenario necessitates a unique response. The best outcome of an organized Accounts Receivable is having a accurate outlook on expect cash flow, and being able to proactively remind customers of an upcoming due invoice. When you remind a client of an upcoming invoice, you are much more likely to receive on time, or near on time payment.
Additionally, when you are actively aware of your delinquent invoices, you can better evaluate your vendor relationships to avoid working with vendors prone to nonpayment in the future.
The F|G Receivables Manager increases your organization ability by including a record of your contact history with each client. It’s helpful to see which method or combination of emails and calls was most successful in resolving a previously past due invoice. Having a record of your collection efforts is also quite helpful should you need to send an invoice into Collections
Success Is In The Details
We’ve found that past due accounts are much more likely to prioritize paying your invoice if you’re able to “hit them with the facts”- that is, an accurate and detailed history of your communication and collections efforts. That’s why we build a CRM-style communication history right within our app, the FG Receivables Manager. Aside from letting the client know this is the third email you’ve sent on the matter, include specific timelines like “when we spoke last week you assured me payment would be received within two weeks, and it is now three weeks past that date”. By remaining firm on the factual details of your interaction, you leave your past due client very little wiggle room for the all to common past due excuses.
Check Out That Cash Flow
If you’re looking to expand your business with investors or a loan, you’ll definitely be asked about your cash flow. Investors will want to see a stable inflow, and a projection for how you might grow your cash flow. If you don’t have a handle on your Accounts Receivable, or are unsure when your clients will pay you what’s owed, it could prevent you from receiving that investment.
Additionally, all might seem lost when it comes to a past due invoice, but with a little proactive effort on your part, you can still collect on a severely delinquent account (without the fees involved in factoring or collections). The Funding Gates Receivables Manager app has developed a statistically proven method of outreach and communication that results in our customers getting paid, fast. Our app comes ready with friendly, stern, and severe emails that have been specifically developed to yield the greatest results.
With advanced Accounts Receivable Management, you can even offer (and keep track of) varied payment plans to increase the likelihood of collecting on a delinquent invoice.
When it comes down to it, now that small businesses have technology available to them, not properly managing their Accounts Receivable is a grave oversight. To run a business successfully you must ensure your cash inflow (accounts receivable) matches, and hopefully exceeds, your cash outflow (accounts payable). You should be as involved and organized with your AR as you always have been with your AP.