LUTZ BUSINESS INSIGHTS
Customers Paying Late? 4 Ways to Collect Faster
LAUREN DUREN, SENIOR ACCOUNTANT
It’s probably one of your most frustrating challenges as a business owner or manager: getting customers to pay on time. Unlike other elements of your work, it feels like you have little control.
You actually have more control than you think. Here are four actions you can take that may result in receiving more timely payments.
Accept online payments.
This is the single most effective step you can take to encourage customers to pay faster. It takes time to prepare and mail a paper check or to dispatch an electronic payment from a bank website. Set up a merchant account through one of many companies that offer them, and your customers can simply supply a credit card number or authorize an e-check. If you’re using an accounting application like QuickBooks, you can e-mail invoices and have the customer pay the invoice directly online. You will then get an email informing you the customer initiated payment.
You want to project a polished, professional, courteous image to your customers in your sales forms. One key to making that happen is by the language you use. Is it clear and understandable? Are your invoices designed such that the amount and due date are prominently displayed, and the recipient knows exactly how to remit payment? Clean, well-crafted invoices can portray your company in a more positive light.
Track aged receivables carefully, and chase down past-due amounts.
How do you keep track of outstanding payments on invoices? If you’re using QuickBooks, it’s easy: You can just create a report. Manual accounting systems usually involve paper calendars and sticky notes and a lot of paper-shuffling, and are much less effective. Either way, follow-up is just as critical as the actual tracking. You can:
- Send statements. Create forms that display all invoices and payments within a specific date range. Customers may be confused about their histories. Accounting software automates this.
- Send reminder emails and/or letters. Be courteous and professional, but firm.
- Nothing gets a customer’s attention like a voice on the phone. Write a script if that would help, or at least good notes.
There are two primary financial tools you can use to speed up receivables. If you make it clear on invoices that finance charges will be added after a certain date, you’ll probably have fewer tardy payments. You can also offer early-payment discounts; for example, offer a 5 percent reduction on the total if received 10 days early.
Do you have the time and staff to deal with finance charges? Do you know how to determine what impact discounts will have on your cash flow? QuickBooks can do the math for you, but setup can be a challenge.
You may be uncomfortable following up on late payments. Those collections tasks will be minimized the more you do upfront to encourage on-time remittances. We’ve worked with numerous small businesses on accelerating receivables and suggesting other ways to improve cash flow. Contact us, and we’ll do the same for you.
ABOUT THE AUTHOR
LAUREN DUREN + SENIOR ACCOUNTANT
Lauren Duren is a Senior Accountant at Lutz with over three years of relevant experience. She provides outsourced accounting services to clients with a focus on tax, payroll compliance, and healthcare consulting.
AREAS OF FOCUS
- Outsourced Accounting
- Payroll Compliance
- Healthcare Accounting Consulting
- Nonprofit Industry
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- National Medical Group Management Association, Member
- Nebraska Medical Group Management Association, Member
- Certified Public Accountant
- MBA, University of Nebraska, Omaha, NE
- BSBA in Accounting, University of Nebraska, Omaha, NE
- Lutz Gives Back, Volunteer
SIGN UP FOR OUR NEWSLETTERS!
We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.
13616 California Street, Suite 300
Omaha, NE 68154
747 N Burlington Avenue, Suite 401
Hastings, NE 68901