Billing and Collecting - Where is your money?
You can’t manage a business without money, so you have to know where the money is coming from, and when it is coming. If you do the work, you should get paid. If you don’t get paid, don’t do the work!
Customers who routinely delay payment as a matter of policy should become ex-customers.
Customers who delay payment due to genuine financial causes are potentially placing your firm in the same financial condition that they are in. Be firm, fair and financially sound. Get paid on time!
Your billings produce your cash flow so each day that you delay billing your customers, you negatively impact your cash flow. You need the funds in your account, not your customer’s, not only to enable you to pay your own bills, but to reduce the amount of interest expense associated with borrowed money.
Statistics show that the longer a bill remains unpaid, the less chance you have of collecting. Get your collection procedures established and working properly.
Your billing must be accurate to eliminate delays in adjusting discrepancies.
Prompt billing gets the invoice to the customer while the details of the job are fresh in their mind.
The sooner the invoice is received and approved by the customer, the sooner you’re apt to receive payment. Remember, there is no embarrassment in asking for money when it is due.
Keep accurate records of changes and extras in your installations and see that the proper charges are included. Be clear to avoid confusion.
Follow up on delinquent accounts with a letter, email or personal phone-call. Assume the best; perhaps there’s a misunderstanding that can be resolved by making contact with the debtor. If you are sending a letter or an email, you might want to set up a template for yourself, to standardize the process. The letter should thank them for their business, and kindly remind them that their payment is late.
Start collection procedures as soon as the invoice is past due.
Issue duplicate invoices immediately when the customer claims the original was not received. If you have the customer’s email address, email them an invoice, and select the email option to request a “receipt” when the email is opened.
Make a photocopy of every payment received. These duplicate records help to determine whether a payment was actually made. At some future date, you may want to have information regarding this customer’s bank and its address. Retaining copies of their cheques will provide a record of this information.
Determine who is responsible for collections.
Establish a written procedure.
Send a friendly reminder immediately when the bill is due.
Delegate responsibility for collections to someone who is strong-willed and firm.
Never let anything get over 30 days past due. If you let your accounts receivables go past 30 days, it shows a court and the lender you are not a business just a hobby. Hire a bookkeeper that has collection experience. Make sure he or she is nice; because you will get paid with a spoonful of honey and will get a battle with an ounce of acid.