7 Key Strategies to Improve Account Receivable Collections

Analyze data to spot trends, forecast late payments, and determine a customer’s creditworthiness. Your system for requesting payments should include easily usable templates to chase debtors at every stage of the process. Late payments are a fact of business, but having a plan in place to track them, chase them up and not let them continue for too long is vital to minimize their impact on your organization’s viability. Research by payment giant BACS discovered 76% of businesses face late payments of up to six months beyond the terms agreed in contracts. Even more importantly, you must create a system that ensures your law firm stays financially stable and operationally efficient without compromising client relationships. Adopting these accounts receivable best practices can support your business growth.

Send reminders well before the due date

This means that if the patient pays their balance within 10 days instead of 30, they get 2% off the total. When you automate your AR process, taking out an aging report becomes much simpler. It expedites forecasting and saves time as you will be able to extract the report in just a few clicks. Remember, effective communication and regular performance reviews are the glue that holds these improvements together. Every stage helps create a more solid and predictable AR process, whether it’s improving internal collaboration or improving your invoices.

It requires strong communication, negotiation, and a customer-oriented approach. This helps to maintain and improve relationships while ensuring timely payments. An efficient collections process is essential for financial stability and supporting the overall health of a business. Accounts Receivable (AR) collection refers to the process of collecting outstanding payments from customers or clients for goods or services provided on credit.

Electronic Invoicing

Several companies don’t realize that their balance sheet is 7 ways to improve your accounts receivable collections not perfectly synchronized with their cash flow. By optimizing the account receivable strategies, the companies can improve their liquidity and minimize debt to stay healthier in the competition. This article will discuss the 7 most productive techniques that let you improve Account receivable collections to a significant extent. For example, customers with high balances or long overdue payments should be contacted first.

If they have had trouble paying other bills on time, they may also turn into an accounts receivable challenge for you. A late payment penalty provides a further incentive for customers to pay their bills on time. You may want to consider talking to your bankers or others in your industry about the cash management tools that would work best for your company, based on your current clients and business model. Banks offer a wide range of cash management services that can help you improve collections and better manage your cash-flow cycle. By ensuring that everyone on the team is on the same page with regard to AR collection processes and goals, you can improve communication and coordination within the team.

Build a plan for following up on late payments

To not get overwhelmed, the trick is to focus on actions that will have the most impact. Most often this will mean focusing on the most overdue invoices or largest unpaid invoices. This is especially true if many of your outstanding balances are distributed across only a few clients, which is quite often the case. Defining the roles and responsibilities of individuals involved in the collections process is also key. Assign specific tasks and establish accountability so everyone understands their roles in the process. HighRadius stands out as an IDC MarketScape Leader for AR Automation Software, serving both large and midsized businesses.

• Make sure that your customer service team is knowledgeable, friendly, and responsive to customer inquiries and concerns.
• You can manage receivable collections more efficiently by implementing a few different strategies, such as creating a receivable policy, sending out payment reminders and creating effective invoices.
• Analyze data to spot trends, forecast late payments, and determine a customer’s creditworthiness.
• Personalizing communications gives you the opportunity to communicate directly with your customers, so you can determine what’s causing the non-payment and keep a good customer relationship.

Use aging reports to identify accounts that are becoming increasingly overdue and prioritize them accordingly. Make sure everyone understands that collecting payments is not just a support function but a vital part of maintaining strong client relationships and a healthy cash flow. Segmenting your customers based on their payment behavior can also help tailor your strategy.

How to Automate Your Accounts Receivable Process for Accelerated Cash Flow

We empower companies of all sizes across all industries to improve the integrity of their financial reporting, achieve efficiencies and enhance real-time visibility into their operations. If you reach a point where you do have to use an agency, make the client aware of it before you transfer the debt. At this point, they’ve likely been unresponsive, but a notification of debt going into collections might motivate them to finally settle the debt with you directly. Receivables collection management involves a series of essential steps to ensure the efficient and timely collection of outstanding payments from customers.

How to Move from Cash to Accrual Method: A Complete Guide for Business Owners

This ensures a portion of the payment is secured before goods or services are fully delivered. Accounts receivable is one lever that can help you gain control over your cash flows. Taking an active stance on managing AR requires strong communication and teamwork.

Following Systems

We help law firms automate invoicing, billing, and payment collection with features like TimeSolvPay and our in-app client portal that offer convenience and transparency. Clients may delay processing payments when there is confusion regarding the services rendered. To avoid such issues, make sure your invoices are clear, concise, and detailed.

• Accounts receivable collection involves the business sending invoices to its clients to claim payment for goods or services provided.
• Understand the key components of cash automation and the significant impact they can have on your business’s operational efficiency.
• With just one click, you can send hundreds of invoices and receive payment directly on the same platform.
• A well-designed invoice serves as a formal request for payment and a comprehensive record of the transaction.
• Depending on your relationship with the client, as well as the industry and geography in which you operate, you can also promptly call the customer for a friendly reminder.

To ensure clients receive timely payment reminders and invoices, it may be worth looking into specialized law firm billing software. Automating your AR collections is another way to ensure that you never miss a beat tracking your accounts receivable. Having an open conversation with clients can not only work to build stronger client relationships for your business but also allow you to understand why the payment was late and avoid that in the future. Whomever you choose to manage accounts receivable needs to understand that they must contact the client on the first day that a payment is late. Accounts receivable is money or payment owed to a business by customers who received goods or services with an agreement to make payments within a stated time.

Creating AR aging reports helps to identify any overdue invoices that are still outstanding. Help better streamline your AR workflow by implementing a process that tracks and measures the payment status of your patients. Many times customers get annoyed and do not pay because they are followed up on even after having paid their dues. This majorly comes due to a lack of communication and collaboration between the sales team and the collections team. Good management of your debts is important to keep up the goodwill of your company.

You schedule follow-ups two weeks after an invoice is sent and escalate the frequency if payment is not received promptly. Like any business, law firms may hire collection agencies, with fees reaching up to 50% of the funds recovered. An even greater loss would be to write off unpaid invoices as bad debt since the firm receives no compensation for services provided.