Cash Flow Woes: Tips For Collecting On Past Due Receivables

It does not matter how well your business is doing if you are having trouble getting timely payments for goods and services provided. Not only are you putting a pinch on cash flow, a lot of wasted time and money goes into a poorly executed collections process. If your accounts receivables department is struggling with slow payers or clients who just do not seem like they have intentions of paying you anytime soon, here are some tips to establish a streamlined  process that can help get those invoices paid sooner.

Get On it Right Away

Chances are, the client is not purposely paying late, but with a friendly nudge, it may help get that invoice paid sooner. If they are experiencing a financial situation that is causing them not to pay their bills on time, the vendors who do not reach out until an invoice is well past due may not be a top priority; if customers know they will probably not be hearing from you until the bill is 60 days past due, this may become the real ‘’due’’ date for your bill. Reach out to customers immediately after the pay-by date has passed to make sure they received the bill or to see if they think it has errors. Before picking up the phone, review the invoice yourself to see if there are any problems. Getting some good accounting software will help you keep tabs on late payments so you can get on them sooner than later.

Establish a Consistent Method of Collections

Consistency always gets better results than haphazard actions. To create a streamlined collections process, you need to establish a set process that is followed every time. Perhaps the first contact is an email followed up by a phone call within the week, followed by a letter. Whatever you decide works best for your company, develop a plan and stick to it. Then, when a client is still unresponsive, you can decide what further, more aggressive tactics you want to take.

Go Up the Chain of Command if Necessary

If you reach out to the company and find yourself getting vague answers on when you can expect payment, look to talk to someone with higher authority. A person higher up in the company will have more authority to get things moving faster and will likely care more about the reputation of the company than a clerk in the accounting office. A person of this nature is also more likely to realize the value of the work and services you are providing and does not want to jeopardize that.

Considerations for Collection Agencies

If you are not having any luck getting that client to pay, you may need to consider collection agencies. There are two different kinds—ones that take a percentage upon successful collection or ones that offer flat fee services where you pay for a certain number of accounts upfront and get to keep all money collected. Some collection agencies offer a free 10-day demand letter that states collection activity will start if payment is not received in this timeframe. This official letter may spur clients into action to avoid collection services.

Considerations for Purchase Order Funding

If past due invoices is really putting a crunch on your cash flow, you might consider purchase order funding to help your company meet its immediate need to pay vendors for products and services your busines needs. This comes with a fee of course so you need to carefully examine your situation to determine if the expense is worth it; contacting a provider to have PO funding explained in detail is a great first step in deciding on whether this service is right for you.

Kelli Cooper is a freelance writer who enjoys discussing tips on how businesses can improve their financial health.

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