When a business owes its suppliers or vendors for goods or services that were received on credit, this is known as accounts payable. Accounts receivable is the opposite and measures the money that customers owe to a business for goods or services already provided. You might be wondering why any business would sell a product or provide a service without payment in advance and that’s because when dealing with regular customers, they can make more sales and reduce transaction costs. Being on top of your accounts receivable is important because you need to get paid. If you don’t manage your accounts receivable correctly, your business will quickly run out of money.
Lack of cash is one of the main reasons why small businesses fail. It’s hard to dig yourself out of bankruptcy. Accounts receivable tells you how much of your cash flow is being held up by unpaid customer invoices. Your cash flow considerations will determine how long you’ll allow a customer to go without paying.
If you want to plan for future growth and to have full transparency in your business, the first step is to be proactive and have a sound accounts receivable process in place.
How to improve your accounts receivable
Having excellent accounts receivable can be done once you adopt these three changes.
1. Maintain accurate contact information on customers
Are you keeping the email address and billing address of your customers is up to date? As simple as it sounds, invoices are often unpaid due to the customer not receiving them. An up to date customer directory will also give you peace of mind, knowing that your invoices are going to the right place.
2. Implement systems to invoice customers electronically
Maximise your efficiency and improve your time management by implementing online systems that can chase up your unpaid invoices automatically. Your bookkeeper will know what program is best for your business and can help you with integration with Xero.
3. Collection process
Make sure you make it as simple as possible for your customers with multiple payment options. If customers are on a payment plan, make sure you have a system in place to regularly check that those payments are being made on time.
Sounds easy right? Well not exactly. As a business owner, you may not have the time to chase up every single invoice or make multiple phone calls to your customer. Or maybe the Christmas and New Year break has put you behind on your accounts receivable. Whatever the case, this is where a debt collector comes in handy.
Getting paid on time is the best (and most simple) way to improve your cash flow, but sometimes it can be awkward having to chase up your customers yourself, especially if they’re giving you the run-around. Not only will outsourcing to an expert help reduce your giant to-do list but it will also contribute to maintaining a positive relationship with your customers.
Why Carbon Concierge?
Our team can work with you to improve your accounts receivable. By outsourcing your accounts payable and accounts receivable to our virtual assistants, you’ll gain more insight into your business financials.
The team at Carbon Concierge will also keep an updated record of your debtors so you’re aware of which customers still owe you money. Our virtual assistants can follow up with your debtors on your behalf, so you can focus on your business and avoid the stress and issues caused by having to follow up yourself.
Instead of paying a percentage of the invoice, as you would do with a debt collection service, you pay a set fee. This way you’re only paying for what you need. We’re locally-based and as small business owners ourselves, we understand your struggles as a business owner. At Carbon Concierge, we deliver a more personalised service to our clients, working closely to grow your business. Get in touch with us today to get started.
