A couple of months ago, I made my first overseas trek since 2017 – not for vacation – but to meet with the rest of the Fritz Financial Solutions team of accountants in the Philippines. It was important to me to show these women the time and attention needed to...
Chase Down Outstanding Invoices
As we’ve touched upon in our last several blogs, small-business professionals must build positive habits to increase their chance of success. So far, we’ve discussed the importance of consistently reconciling accounts, and why it’s vital to pay your bills on time. Next, let’s talk about why you need to follow up with your customers and accounts receivable consistently.
First off, consider a contract with every client who engages your services. If you’re not involved in a business that collects payment on demand (i.e. a bakery, store front, etc.) you run the risk of doing work and not getting paid at all. You may experience some costs up front for an attorney to draft your contract, but these costs pay for themselves many times over. I’m speaking from experience here—the times where I’ve had the worst problems collecting payment are those where I didn’t get those clients to sign a contract.
Once you have your contract in place, you might think it’s a simple thing to keep in touch with your clients and AR. However, across my years of experience handling financial management, I can’t even count the number of businesses I’ve serviced with receivables left hanging six months, a year or even longer. Still others went to the trouble of providing a product or service to a customer, yet never bothered to send an invoice for it. That’s a headscratcher—don’t you want to get paid for what you do? Otherwise you may not be able to do it much longer.
Sending out an invoice soon after you deliver your product or service is an important first step—the next is following up if the check or electronic payment doesn’t arrive promptly or within your agreed upon terms. The longer you let an invoice go unpaid, the harder it may get to collect on what you’re due. For one, your contact at the company could have moved to another position, leaving no one at the firm that has any memory of your dealings or why they owe you money. The process of reminding them, and verifying your invoice is legitimate, could further delay your payment.
Years ago, one of my clients was sitting on some past-due receivables, along with some unbilled client expenses. These languished for a number of reasons. One customer just needed a completed IRS Form W-9, something that takes less than a minute to fill out and transmit. Another client required reauthorization before they would pay the invoice, because the original purchaser had left the company. Through communicating with these clients, providing them with the documentation they required to move forward brought the company in more than $200,000 within 90 days.
Staying in control of invoicing and receivables is an extremely important component of managing your cash flow. What’s more, your company needs that money to pay its vendors for the services and products they’ve provided to you. If you do not collect on your invoices and unbilled expenses promptly, you won’t have the money to invest back into your company or pay yourself.
Do you have a process for accounts receivable? If so, determine what procedures you have in place to collect on invoices and expenses and analyze how they are working. If not, what processes should be put into place? Be diligent about checking in with clients and customers after a sale, and confirm they are happy with what you provided them—catching problems early on and rectifying any issues means you have a better chance of collecting money on time, and keeping a positive business relationship. Set aside time every week (make a calendar reminder if you need to) to check in with customers, gauge their satisfaction, and follow up on payments that are past the 30-day mark.
Collecting from clients can be challenging and uncomfortable, especially on overdue invoices—contact me at Daliah@MySmallBusinessPro.com and I’ll be happy to help you with the process.
What solution can Fritz Financial find for you?
Schedule a meeting with Daliah Fritz