Even with the improving economy, cash is still tight for small business owners. Here are some tips to speed up your accounts receivable collection and bring more cash into your business:
- Use a time log. If you bill by the hour or do any type of service work for your customers, it’s essential for you to keep a good time log and keep it current. Whether it’s paper-&-pencil or a computer-based timelog (I use TimeTracker by Nonlinear Ideas), you won’t be able to capture that billable time if you don’t track it!
- Bill more frequently. The less time that passes between the time you finish your work and the time the customer gets your bill, the more likely you are to be paid quickly. Instead of waiting until the end of the month, bill right away when the job is completed. For businesses that bill by the hour, billing twice a month can dramatically speed up your collections.
- Use statements. Don’t let your clients forget about your bill! If you haven’t received a payment by the invoice due date, immediately follow-up with a statement. A friendly reminder can work wonders! A consistent routine of reviewing receivables and requesting payment on overdue invoices can give your cash flow a nice boost.
- Improve your customer service. A happy customer is more likely to settle their bill promptly. Don’t hesitate to answer questions or concerns about your bill. By resolving any concerns up front, you’ll reduce the chances for disputed bills later.
- Consider accepting credit cards. There’s no doubt that clients will pay faster with a credit card than they will with a check via snail mail. The added convenience to your customers is another benefit that you’re providing to them. The merchant charges you pay may be minimal in comparison to the improved cash flow that you’ll realize.
- Reassess your payment policies. Do you have some customers who routinely give you collection hassles? Consider changing your payment terms so that their final product isn’t delivered until payment is received. It’s a common practice to ask for a downpayment, with the remainder due upon completion of the project.
Finally, if you don’t seem to have the time or expertise to put some of these suggestions into practice, consider working with a virtual bookkeeper. A bookkeeper will keep your invoices up-to-date and stay on top of receivables and collections for you, allowing you to focus on your business. Additionally, you’ll be better prepared for tax time and better informed on the financial health and well-being of your business.
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.
