Accounts Receivable Management is one of the most important processes of your business, after all, its main focus is acquiring revenue so that you get paid! The process, though seemingly straight forward, isn’t as easy as it may seem. You must maneuver through many obstacles and acquire some skills to manage your accounts receivable department. Here are a few Accounts Receivable tips to make sure you get paid.
If, however, you are new to this topic, here’s a Billing for Beginners guide to help you get started.
3 Tips to Create an Efficient Collection Process
1. Organize and Collect Information
The first thing you want to do with your Accounts Receivable department is to organize it. Having full control of each invoice status and of how to deal with each client is essential to avoid losing money.
The second step is to become as informed about your customers as possible. Set up a thorough credit application that allows you to vet each client with the information you obtain about them. This will help you decide how much credit you’ll extend and to whom you’ll extend it.
2. Categorize each Customer and Align Expectations
It’s common to have different kinds of customers. Here, at Pipefy, we have self-employed customers to global companies. Therefore, the Accounts Receivable process needs to be different for each one. Consequently, collecting information about each one is important to categorize them all.
Then, based on the singularity of each client, the next step is to set a credit limit. Limiting credit to new customers and letting them build upon said credit with a solid payment history can help you keep the right kind of customers and build a healthy relationship with them.
Aligning expectations is a necessary step to achieve customer success in a company. Therefore, in addition to hearing what your customers expect, say what you expect from them.
3. Create an Email Collection Process
Speaking of payments, you’ll probably want to set up reminders a few days before a payment is due. If you’re using an automated system, such as Pipefy, to do your accounts receivable management, you’ll have some benefits, such as an easily configurable email reminder to make sure that your clients are aware of an impending due date. Make sure that these interactions are polite and simple. You don’t need to charge them if they aren’t late yet.
If a payment is late, don’t wait. Send a late notice the day after each missing payment. The later you draw out the process, the longer it will take you to get paid and the more likely you won’t get paid at all.
Do’s and Don’ts of Writing Collection Emails
DO: Keep it short
Make sure the recipient of the email can quickly catch the key details of the invoice without spending lots of time reading through frivolous content.
DO: Be polite and professional
Many clients will have excuses ready; some may be legitimate and some may be baloney. No matter what, be polite and professional. There’s no need to get nasty with a client over missed payments.
DON’T: Use trigger words
Clients and customers may not even be receiving your emails. Did you know that words such as “overdue” or “collections” are oftentimes blocked by spam filters? That’s why it’s important to refrain from using these terms and simply use the invoice number in the email’s subject line.
DON’T: Use all caps
Writing whole words with capital letters while emailing is a sure way to turn off the recipient because he or she will feel that you are angrily yelling. Instead, you should try to use friendly, polite, and yet suggestive phrases such as, “Please submit payment right away” or “Please pay by…”.
You should never wait 90 days after an account is due to send accounts receivable email. If you’re having a hard time remembering when to send emails, simply set an alert after each invoice is set to help you keep track of your accounts.
Start Managing your Accounts Receivable Efficiently
Pipefy has a pre-built Accounts Receivable Template that allows you to
- Create your collection emails
- Have full control of your receivables
- Avoid losing money
- Build an error-proof financial operation