How to Build a Watertight Accounts Receivable Process

Posted 19 Mar '21

Getting paid for the work you do is important, that is why it is crucial to have an effective accounts receivable process in place.

The process you implement should consider every aspect of the payment lifecycle, finding the right clients, communicating expectations, billing accurately and following up on late invoices.

Whether you need to build an entire accounts receivable function or improve on existing policies. The following tips can help you develop an effective system in your small business:

• Pick the right clients – Before you take on new customers, run credit checks and have them sign written terms, including billing timeframes and late payment penalties.
• Train Customers to pay on time – When first billing new customers, give them a courtesy call to discuss the invoice. If they miss the due date, call the next business day to check in with the customer. This will help to set your expectations.
• Quick, effective invoicing – Always send invoices straight after work is completed, to get the payment ball rolling. Offer options like EFTPOS, mobile payment solutions, credit card or direct debit facilities to make payment as easy as possible for the customer.
• Consistent follow-ups – Consistency is key! Keep a close eye on your unpaid invoices and check for payment frequently. If an unpaid invoice is past its due date, have a process to follow up – this could include email reminders, statements, phone calls and eventually debt collectors.
• Automate – Utilise your electronic software to save you time and improve collections. Most accounting software will allow you to email quotes and invoices.  Automatic reminders can be set to email reminders to customers just prior to due date and again until payment has been received.
• Review your clients – If you have clients that frequently pay their invoices late, think about changing their terms – they may need to pay half upfront or use another payment method. In some cases, it might make sense to let them go.

If you need assistance to optimise your accounts receivable process our expert accounting team are here to help. Our Bookkeeping Service also offers accounts receivable management if you would like to outsource this task to us. We can take care of all your bookkeeping needs or only some things.

Please feel free to get in touch with your WDF contact or phone 02 6921 5444.