As a business owner, you’ll want to increase your company’s value and return on capital. Start by rethinking collections.
There’s no need to seek out new capital sources if you can free up cash by reducing your receivables. Examine every aspect of your receivables process to find out how you can get paid faster.
Make sure as many of your collections as possible are digital. Electronic payments have cash and checks beat as far as speed, efficiency, fraud prevention, and customer preference. The faster money comes in, the faster you can put it to good use as working capital for your business.
Check and make sure that your financial software is up to date so your system posts payments and generates reports quickly to help you make smart cash decisions.
Automating collections minimizes error, reduces fraud risk, simplifies reconciliation, and saves your employees time. Did you know checks are the number-one source of fraud?1 Digital payments and online banking help you prevent fraud from costing your company time and money.
Electronic payments can even boost your cash flow. Use these 10 strategies to manage your receivables better and access more capital:
1. Simplify your payment options.
Offer streamlined and convenient payment methods, preferably those that use digital technology. Use multiple communication channels to remind customers when it’s time to pay and attach a link to your payment collection website in every message.
2. Accept credit and debit cards.
Use your bank’s merchant services to improve sales with added convenience and speed up receipt of payment. You’ll also be able to offer business customers the option to pay with a purchasing card.
3. Use online payment methods.
With a payment collection website, your customers’ invoices are password-protected and they can pay electronically using Automated Clearing House (ACH), debit cards, or credit cards. Websites minimize the need for staff processing and allow you to view payments immediately.
4. Automate high-volume, low-dollar collections.
Service repetitive payments by using ACH transactions to improve collection efficiency and lower costs.
5. Implement ACH with electronic data interchange (EDI) for high-dollar payments.
Use features like invoice detail and universal payment identification code (UPIC), which is used to secure proprietary bank account information.
6. Re-evaluate your billing policies.
Send invoices to your customers on a regular basis with payment options, terms, and amounts past due. Consider billing more than once a month or earlier in the month for faster payment. If possible, bill and collect at point of sale or upon delivery. Make sure your payment terms work in your favor and offer discounts to customers that pay early.
7. Educate customers on your payment terms.
Have your sales team discuss payment options before an order is placed and again before work is completed. Make sure invoices coincide with product delivery or completion of service.
8. Use a bill consolidation site.
Receiving batched payments through multiple sites helps reduce check volume and documents ACH credit from your customers’ banks or bill pay services.
9. Consider a lockbox.
If the nature of your business requires cash and check payments, a lockbox service might decrease the amount of time it takes for mailed payments to hit your bank account and may also be cheaper than internal processing.
10. Integrate your receivables.
If you consolidate receivables, all your payment methods—ACH, credit card, and lockbox—are integrated by an outside vendor and can be downloaded to your books along with detailed reports that provide a comprehensive, real-time view of your receivables. There are many third-party payment services, so make sure your vendor offers technology that saves you and your staff time reconciling accounts.