How To Get Your Invoices Paid Sooner
If you have strong sales but still find yourself with cash flow pressures, a solution could be shortening the amount of time it takes to collect your outstanding invoices. This can be achieved by:
- CREATE AN A/R AGEING REPORT
The first step to reduce your accounts receivable days (the amount of days that it takes to get paid for invoices issued) is to print off an aged accounts receivable report. This is done by creating an accounts receivable (A/R) ageing report, which you can do through most accounting software. This will track and measure the payment status of all your customers. Accounts are segmented into the number of days since the invoice was issued (such as 0-30 days, 31-60, 61-90 days, and beyond 90 days) and the amounts due. This way, you can spot potential collection problems early, before accounts become significantly late and focus your collection efforts more efficiently.
- SPEED UP YOUR INVOICES
If you find you delay things till the end of the month (such as invoicing), you are also delaying the time in which you could have been paid. By completing invoices upon delivery, it ensures faster payments. Be sure to thoroughly check for errors in completing any invoices, otherwise this can also cause delays. You should be able to automatically generate this from your orders.
- BE PROACTIVE IN YOUR COLLECTION EFFORTS
A few days before payment is due, have someone in your accounting department contact your customers to make sure they have everything needed to pay — especially if the invoice is a sizeable one. You should never feel uncomfortable about asking for payment. Maintain a regular schedule for emailing or mailing invoices. If you find that you pay your suppliers before you have been paid it can create cash flow problems especially towards the end of the month, and changing these credit terms could save you some stress.
- EXTENDING CREDIT
This isn’t always a bad thing. However, tread carefully, as extending credit is delaying your receipts. Don’t extend credit just to increase sales- a sale isn’t a sale until you’re paid! You should have a defined approval process with deposit amounts and credit limits based on the financial situation of each individual customer.
You also could offer a discount for paying early. This will depend on the invoice amount and the client. While there is a cost to your business in offering such a discount, the potential cash flow boost it provides could make it worthwhile.
For more information on the above, or any of your accounting needs, don’t hesitate to contact us for a free meeting.