If you’re part of the finance team of a B2B e-commerce business, you’re probably only too aware of the challenge that accounts receivable (AR) can be. Let’s be totally honest here: AR can go beyond a challenge and become a massive pain. With cash flow being the lifeblood of all businesses, a lack of it can spell an early end to your venture. The good news is that it doesn’t have to be this way.
By streamlining your accounts receivable process you can keep your business healthy and trading for many years to come. You may be wondering how it can be done and what steps you need to take. Well, we’re here to help, so read on to learn how you can rid yourself of the headaches caused by AR.
Carry out a data audit
Whenever you’re billing your customers, you’re hoping for a basic first task to be achieved: the invoice actually reaching the person that it’s supposed to. Indeed, it certainly is basic, but when was the last time you, or your company, checked? Has there ever been a refresh of the data that you hold to make sure that it’s still current?
While there are legal reasons to ensure that your data is current and accurate, beyond this, you're harming your business if it’s not. Be sure to review your customer data on a regular basis and ensure that you’re actually invoicing who you think you are.
How quickly are you invoicing?
One way to streamline accounts receivable, and ensure that you’re getting paid quickly, is to actually get your invoice out there. Do you know the biggest thing that’ll stop your customers from paying you on time? Not even asking them for the money! If you’re not sending your invoices out, you’re quite simply not going to get paid.
If you’re working on projects for your customers you should be sending your invoice out on the day that you complete. Sending out goods? If so, make sure that your invoice arrives at the same time. If you’re sending invoices out weeks later, your customer is likely to lose track and you won’t be getting paid anytime soon.
Not everyone is your ideal customer
When starting a business, there’s often a rush to get as many customers as possible. The thought, of course, is that all of those customers will be bringing in cash and lead to business growth. However, if this thought process carries on long after the launch date, you may find yourself doing business with anyone who’ll entertain the idea. The problem is that not everyone is worthy of your time.
If you’re billing customers after you’ve delivered your product or service you’re effectively giving them a line of credit. Is every business really creditworthy? Before you automatically offer a line of credit, step back and check the creditworthiness of any business you’re dealing with. Maybe even ask other suppliers about the track record of your potential customer.
Have a clear agreement laid out
If you’re wanting to be paid on time and to protect your cash flow, it’s vital to have things right from the oft. This means ensuring that your customers are 100% clear on exactly how you bill, when you bill, and what the whole process involves. As an absolute minimum, you should be setting out how many days your customers have until an invoice becomes payable, as well as detailing the methods of payment that you accept.
Beyond this, you should also be making clear any penalties that apply to late payments. If you’re looking to encourage your customers to settle their invoices as soon as possible, why not explore the idea of applying a discount for those who pay early?
Are you sending out hard copies of an invoice with goods or, at the extreme, posting one out after delivering a service? If so, one of the best ways to streamline your AR process is to go digital. Explore the vast number of software packages that create and send invoices in an instant.
It’s not just your invoices that are worthy of a look. You can really increase productivity by exploring what’s on offer digitally. Even opting for digital signatures will see your processes being much more efficient.
Lose the not so good customers
We’ve already spoken about some of the checks that you should make before offering a customer a line of credit. What if it’s too late? What if you have bad payers on your books? We’re not just talking about a customer that may have slipped up once. We’re talking about the serial late and non-payers. These are customers that you can do without.
Conduct an audit of your books and see who these customers are. Once you’ve identified them, it’s time to remove them from your business. You can then focus on customers and clients that are worthy of your attention.
Have a plan
With all the goodwill in the world, there are still going to be times when even your best customers could be late paying their invoices. More often than not it’ll just be a slip-up, but you need to be sure that there’s nothing else going on that you need to know about.
Have a process in place that enables you to find out. Be clear about when an unpaid invoice should be followed up. Perhaps start with an email and then reach out with a phone call. Communication is key, but it has to be structured and not sporadic.
Eliminate the risk
We understand that reviewing, and changing, your accounts receivable processes takes time. We also understand the significant impact of leaving things in their current state. That’s why, at Hokodo, we offer a solution that can eliminate your exposure to the risk of nonpayment entirely, all while reducing the workload for your finance team.
We offer a Buy Now, Pay Later solution for your customers. This can see you being paid upfront while we deal with collecting payments when they are due. By allowing us to focus on offering credit, you can focus on growing your business and taking it to the next level. Why not get in touch to book a demo, and see what we can do to help ease the operational burden of your finance team?