Dandelions in Your Accounts Receivable

Springtime brings spring cleaning, green grass and, unfortunately, dandelions. Similarly, as your company grows, you may have noticed some dandelions, or past due accounts, in your accounts receivable. Driving to and from work in the Midwest, it is hard to miss the dandelions. Such dandelions are a daily reminder to address the dandelions in your accounts receivable. Whether you have one or two past due accounts or a hundred past due accounts, failing to take action can cause your company’s dandelions to spread.

Non-paying customers or clients may tell acquaintances or colleagues that your company has a reputation for not collecting on past due accounts. Before you know it, your accounts receivable may look like this, or maybe it already does.  Having a large amount of aging accounts receivable can make a company much less desirable to lenders or to potential buyers.  Cleaning up old accounts receivable may improve your cash flow and reduce your bad debt.

You can improve your collections dramatically by implementing a few simple steps in your collections process:

1. Make your payment policy clear and enforce it.  Make your payment policy clear to your customers so they understand their obligations prior to shipping products or providing services.  Having a client acknowledge that they understand the policy and that you enforce payment goes a long way to setting expectations.

2. Send out invoices in a timely manner.  Billing immediately after providing the services or shipping products in a systematic manner sets the tone for good billing practices and expectations for payments.  Customers don’t like to receive invoices late.

3. Make it easy for clients to pay.  Do whatever is necessary to help clients pay. Allowing customers to use PayPal or credit cards or having a Square® available when you provide the product or services makes it easier to pay. 

4. Follow up on late accounts. Follow up on your aging accounts receivable so you’ll understand what you need to collect.  If customers don’t pay immediately, send a friendly reminder on a regular basis to remind them of their outstanding amounts due.  If that doesn’t work, a call often prompts clients to pay.

5. Fix mistakes. Customers may not pay if they think the invoice is incorrect. We recommend working out billing errors quickly to maintain a customer’s trust, one of the most important components of a customer relationship.

6. Comply with state laws. Every state has different collection laws and some apply the same laws to businesses as they do to collection agencies, which means you may not be able to call customers outside of business hours or disclose to a third party that someone owes you money without consequences. 

If you have implemented the above steps and still have customers who won’t pay, Seck & Associates can help.  We have a dedicated staff who is committed to handling collections in a friendly and professional manner.