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Running a tight accounts receivable ship can help your business stay in positive cash flow for a set period of time. Refrain from extending credit to customers as this practice puts you at risk with your cash flow management. Your business has enough responsibilities in addition to acting as a bank for your clients. Setting up an efficient and effective system to collect payments can grow your business quickly as freeing up positive cash flow can help you devote the excess cash to other growth opportunities.

Cash flow rich organizations can invest capital in new projects or business ventures. Being firm yet professional with customers can increase collections, strengthen business relationships and benefit both parties. Be clear in stating your terms to avoid any confusion and never deviate from your payment agreements to develop continuity with your clients.

Offer Discounts for Prompt Payments

Offering discounts for early payments can influence customers to pay bills on time. Collecting payments at a date earlier than the bill due date frees up a significant amount of cash and minimizes your overall accounts receivable balance. As an example you might reward customers who pay within 10 days of the billing date might receive a 3% discount. Benefitting customers who pay on day 20 of a 30 day agreement can payoff presently and in the long run as you condition customers to respond favorably to your terms.

4 Tips For Improving Accounts Receivables

Track Accounts Receivable Diligently

Stay on top of your accounts receivable collections department to improve this aspect of your business. Maintain a detailed spreadsheet of all customers to keep track of when payments are made as well as the amounts of each payment. Update the list weekly and arrange the spreadsheet according to due date to order the list effectively. If you use accounting software trigger alerts to notify you when a due date is coming up or has passed to facilitate the tracking process. Any tracking system can smooth out your accounts receivable department as knowing when payments are late can help you collect quickly, efficiently and ensure that your organization receives its cash flow due.

Follow Up with Customers after Sending out Invoices

Use the phone to call customers one week aftern sending out invoices to effectively follow up and increase your accounts receivable collections quickly. Ensure that the client has received all the documentation needed to make payment along with the bill. The purpose of these calls is not to bug or force your client into making payment; think of calling as a simple follow up to bolster your relationship and confirm that your customer needs whatever is necessary to make payment.

Never Deviate from Payment Terms

Note the specific procedure for late payments on each bill you mail out to customers. If the customer pays the invoice after a set due date indicate a penalty charge in terms of a percentage. Indicate the new amount due after the penalty is tacked on to the prior invoice. To avoid penalties customers will generally pay on time.

Getting Cash Flowing Again

If you are finding your invoicing troubles are creating a serious drain on your cash flow, accounts receivable financing may be something to consider. Provided the client has a timely payment history, yo you can sell the invoice to a lender who will give you money up front right away—typically around 80 to 90 percent, minus any fees. The customer then pays the financing company directly, who will then give you the rest of the money.