Small businesses can find accounts receivable to be one of the hardest things to deal with. Accounts receivable is when you sell a good or service to your customers and provide them with net terms to pay for the items they purchased. You will need to use an accounting program to track your accounts receivable to find out which customers need to pay their bills and to see where your cash flow currently stands. A wise decision is to use QuickBooks as it will generate the invoice for you and email it to the customer. It will also remind you when you need to mail out invoices if you are still waiting for your customers to pay their invoices to help free up some of your cash flow.
Usually accounts receivable sticks to terms of Net 30 or Net 45. With a Net 30 invoice, your customers must make a payment on the invoice in 30 days from the date of the invoice. Having accounts receivable is a good option for customers as it provides you with a chance to help your customer gain the financing they need to purchase products and give them some time to pay on the invoice.
Accounts receivable can be dangerous to your company if you have customers that are struggling to pay their invoices on time. An option you may need to look into is accounts receivable factoring. This will provide you with a chance to gain the money you need for your business’s cash flow to stay positive and to avoid worrying about acquiring financing to pay for business needs. Having the cash you need immediately will allow you to avoid damaging your business credit as you will have money to pay for your invoices.
If you plan to collect the money on your own, you must be strong with your collection process. Try to get your customers to pay half of their invoice now and the rest within 15-30 days. This will allow you to negotiate with your creditors so you have more time to pay your invoices to them. Some businesses are able to provide different accounts receivable terms based on the needs of their clients. Take a good look at your business needs along with your customer needs so you can try and decide if you can offer financing for long periods of time. If you end up struggling to collect, it may be time to hire a factoring firm to help.
Rarely do small businesses record their accounts receivables on paper anymore. Most small businesses have moved into computer generated programs to track their accounts receivables. Computer programs are easier to balance and use and they have built-in reminders to tell a company when it is time to send out invoices to customers. You can also set up an automatic transfer account with your customers so they have the ability to pay their bills online, which provides many customers with that additional option they need to pay their bills in a timely manner.
Start requiring your customers to make a down payment when they order your products. This way you will be able to collect some of the money up front so you aren’t out as much money with your cash flow. Timely Net terms like 15 days will provide you with the money you need quickly so you don’t have to sit back and wait for your customers to send in their payments. Have some of your best employees work on collecting the payments from your customers as they will be able to talk to your customers and can smooth talk their way into getting a payment in a timely manner.