How do you handle your accounts receivables? Do you invoice your customers in a timely manner? Do they pay their bills on time? Are you struggling to meet your monthly payment obligations to your creditors due to these payment problems from your customers?
Accounts receivables starts when you sell a product to a customer and you offer them credit from your company. Typically the credit is based on payment terms like Net 30 or Net 60. This allows your customer to have an extra month or two to come up with the money they need to pay off their invoice. During this time, the company must have sufficient cash reserves to may up for the lack of money they are experiencing while they wait on their customers to pay off their invoices.
If you don't have the cash reserves necessary to pay for your invoices, you may run the risk of damaging your business credit rating. Your creditors and lenders also expect timely payments from you when they offer you credit. To avoid damaging your business credit rating, it's a wise decision to consider paying half of your invoices up front. This way the creditors and lenders won't report late payments to the credit bureaus for at least 60 days. As you have some extra time to pay your invoices, you can focus on getting your customers to pay their invoices.
Once the accounts receivable payments are accepted, the invoicing process ends. If the customers do not pay their invoices on time, you then can turn the invoices over to a collection company. They are in charge of working with your customers and convincing them to make their payments in a timely manner. As long as you are able to get your customers to pay before the 60 day window, you don't need to turn them over to collections where you can struggle with your customers until they pay their bills.
Are you planning to handle accounts receivables on your own or do you want to hire an outside company to collect the funds from your customers? If you handle the accounts receivables on your own, you will need to focus on keeping your relationships strong with your customers. This means that you may need to give them a chance to explain why their payments were late and provide them with a chance to pay before you start charging them interest on their debt.
A great option to consider with accounts receivables is to hire an outside factoring firm to handle your invoices. These companies will provide you with 80% of the total balance amount up front and then pay you the rest after the customers have paid their invoices. You will need to pay the invoicing or factoring firm a fee for their services but it doesn't cost you too much money compared trying to collect the funds on your own.
When you consider using a factoring company to help you with your invoices, you do need to be aware that they companies typically will reject invoices from customers that are known for paying their invoices late or not at all. Customers like this are seen as a lost cause and they will not pay their invoices. For customers like this, you need to work out different payment arrangements like automatic deductions from their checking account or credit card. You may also require that they pay at least 50% of the total invoice amount up front. This way you can cover the costs of your working capital needs and then wait on the rest of the funds to come in once the customers finally meet their payment obligations.
Corporate Credit Concepts specializes in accounts receivables. For more information about accounts receivables and how it might benefit your business, please CLICK HERE for a free phone consultation.