According to research, around 90% of business leaders believe that late payments or uncertainty in cash flow hinder their business growth. Another finding estimates businesses waste roughly 56.4 million hours annually in the debt recovery process and chase late payments, resulting in significant time costs.
We've all had that one friend who promises to pay back the money they borrowed as soon as their "XYZ thing" comes through. But let's fast-forward a few years. What happens?
Now imagine that same scenario happening in the business world. Unpaid or overdue amounts, also known as accounts receivable, can become a nightmare if not handled timely. They have the potential to cripple your business and create financial crises.
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Here's the good news; you have the power to take control of your cash flow and ensure a healthy financial future for your business. Effective accounts receivable (AR) management is the key to unlocking your revenue potential and maintaining strong relationships with your customers. Plus, the best part? It leads to high liquidity, giving your business the financial freedom it deserves.
However, failure to implement a proper debt recovery process can lead to costly accounting errors, lost revenue, and poor cash flow.
In this blog, we will discuss the most effective tips to improve AR management and make the process effective and effortless.
ESTABLISH CLEAR BILLING PROCEDURES
To ensure smooth payment and avoid confusion, it’s vital to outline clear and consistent billing procedures. As a business owner, you must document your billing process so that everyone in your company follows it. Your billing process should include:
- Billing periods and invoicing dates
- Invoice information
- Recordkeeping procedures
- Periodic accounts receivables process assessment and follow-up
- Collections procedures to handle outstanding bills
Apart from the daily, weekly, and monthly steps involved in billing clients accurately, include the following in the documentation, as well:
- Billing contact information for each customer
- Unique billing details for each customer (if applicable)
- Payment details and notes for each customer
By outlining these things in your billing process, you establish a framework that enhances efficiency, minimizes errors, and fosters stronger client relationships.
2. BOOST YOUR DEBT RECOVERY RATE WITH CLEAR AND PROACTIVE POLICIES
|Recent statistics show that the average success rate for debt collection in the US hovers around 20–30%. For instance, to recover outstanding debts, a business could retrieve only $20–30 for every $100 owed.
Are you struggling with a low debt collection rate? One of the key factors contributing to this challenge is the lack of clear and consistent debt recovery policies. It's time to take control and showcase your business's commitment to addressing unsettled accounts with a well-defined AR collection policy.
To improve your debt recovery outcomes, it's crucial to shift from a reactive to a proactive approach. Instead of chasing late or overdue payments, proactively send payment reminders to your customers well before the due date. By doing so, you maintain smooth communication while ensuring that your customers are aware of upcoming payments.
But what about those customers who have multiple overdue installments? Don't worry, Denefits has got your back!
With Denefits' Accounts Receivable feature, you can effectively deal with bad debt scenarios. Our platform enables you to provide flexible payment plans to your customers so you can start receiving payments.
It’s time to take control of your business's cash flow and ensure that outstanding accounts are handled proactively and efficiently.
3. LEVERAGE BAD DEBT COLLECTION SOFTWARE
Say goodbye to old-school paper checks and snail mail billing—it's time for a modern upgrade! Ditch the time-consuming and difficult-to-manage traditional invoice methods and embrace the convenience of bad debt collection software like Denefits.
With this software, you can streamline the debt recovery process and boost efficiency while maintaining strong customer relationships. Here are a few reasons why debt recovery software is a better choice for your business than hiring a collection agency:
|Harms reputation due to aggressive and profit-driven debt collection methods, leading to customer dissatisfaction and negative reviews.
|Preserves a positive reputation by handling debt collection professionally and respectfully and maintaining cordial customer relationships.
|Exhibits an arrogant attitude when dealing with customers, creating a negative experience and damaging relationships.
|Provides a personalized and non-confrontational experience, ensuring customers don't feel hostile or intimidated.
|The involvement of a third-party agency can lead to a sense of mistrust, jeopardizing customer relationships and satisfaction.
|Enables businesses to take control of the recovery process, handle customers professionally, and maintain positive relationships.
|Often receives negative reviews due to aggressive tactics, poor customer service, and negative experiences.
|Helps avoid bad reviews by maintaining a respectful approach and preserving customer satisfaction.
|Collateral Fees & Expenses
|Involves various hidden costs such as agency fees, commission fees, and a percentage of the recovered amount, increasing overall expenses.
|There are no hidden fees.
|May lack transparency in the debt collection process, causing confusion and dissatisfaction among customers.
|Offers transparency by providing clear payment options and allowing customers to track missing payments.
4. SIMPLIFY PAYMENTS FOR CUSTOMERS
Don't let payment delays become a recurring issue for your business. Often, customers struggle with receiving and understanding invoices, which can hinder their payment process. To ensure smooth and timely payments, it's crucial to make the payment methods simple and convenient for your customers. Remove any obstacles that might hinder their payment experience.
The solution? Incorporate a user-friendly payment portal like Denefits to streamline and automate the AR process. You can effectively communicate with your customers and provide them with all the necessary information at once. With Denefits, you can say goodbye to broken invoice strategies and outdated payment methods that may have been causing delays.
Remember, a late or delayed payment doesn't necessarily indicate that a customer is a bad payer. It could be a result of complex invoice procedures or inconvenient payment options. Using Denefits can overcome these challenges and build strong and cordial relationships with your customers.
By establishing clear billing procedures and implementing proactive debt recovery policies, you can optimize your AR management. With streamlined processes, efficient communication, and flexible payment options, you can ensure timely payments, minimize delays, and foster strong relationships with your customers.