Enhancing Payment Collection Through Outsourced Accounts Receivable
Running a business involves numerous financial obligations, requiring owners to expertly manage their business cash trove. Among the difficulties facing their ventures is cash collection.
Many factors influence the effort of collecting payments from buyers, such as customers with low credit scores or unsatisfactory services or products. But slow cash collection commonly attributes to the communication, or lack thereof, between buyers and sellers.
In practice, identifying the root cause of late payments can be challenging. So, to alleviate the problem, businesses, especially small- and medium-sized ones, would benefit from outsourcing a qualified bookkeeper.
In this article, we will reveal some of the most common, but unexpected, causes of why customers neglect their invoice payments.
Why do clients fail to pay their debts on time?
Inaccurate bank details
Today, payments can conveniently move between accounts through electronic venues. You only need to have a client's bank account. However, customers can often file the wrong banking information, either due to mistyping or outdated information, leading to unforeseen interruptions in the collection process.
Delay in Invoice Payment Due to Lack of Approval
Usually, the resulting invoice from a transaction has to get the green light from a bureaucratic procedure, which involves several departments. If, for some reason, the invoice is withheld during any part of the process, it will postpone the invoice's arrival at the accounts payable department. And the payment collection can consequently be delayed down the road.
Missing Invoices Delay Payment Processing
Human errors are unavoidable in a business setting, as the accounting department can sometimes neglect the handling of an invoice, such as when an employee is on leave. The matter may be further exacerbated if the company is understaffed. As such, invoices could sit idly in a filing box or on someone’s work desk waiting to be processed.
Inadequate recordkeeping of documents
Since many invoices have to flow through tedious approval processes, having many of these financial documents, especially during peak seasons, complicates the task. To that end, without establishing an effective system to record and categorize all the incoming invoices, payment can subsequently be delayed.
Be assertive in your efforts
Trust is essential in the business world, but sometimes it can work against you. Particularly, when you are too lenient in the debt-collecting effort, you create a reputation of an easy-going creditor. As the client gets accustomed to this freewheeling attitude, they start to regard your payment requests as low priority. For such reason, be assertive when you address overdue debts. The practice helps ensure timely payment from your customers.
Improve cash collection with an outsourced bookkeeper
With all the challenges mentioned above, outsourcing a service provider who specializes in bookkeeping will help you alleviate all the hiccups in the cash collection endeavor.
Although business owners may be concerned about damaging client relationships when reminding them of overdue bills, in most cases, clients are more forgiving in this type of situation. As long as communication remains respectful, the customer is likely to be more understanding of your position, since cash is the lifeblood of a healthy business. This is particularly true in a B2B environment where clients are running a company themselves, making them more empathetic to payment collection efforts.
Another thing is that communication will take place between your outsourced bookkeeper with the client's accounting employee. Those aforementioned hindrances typically can be resolved without involving the higher-ups on both sides.
Additionally, your service provider will proactively make phone calls with the client's accounts payable department, addressing all the nuances that can hinder a punctual payment. For example, things that might seem like a trivial chore, like reminding the customer of upcoming invoice deadlines or double checking the banking and address information, can actually help ensure you receive the payment on schedule.
In the event of disputes between the two parties, your service provider should be well-equipped with adequate training to remedy the situation. Minor inconveniences, such as resending invoices and updating banking information, should be addressed and fixed relatively quickly. If, however, the issues require the intervention of more senior personnel, like disagreement regarding the payment terms, the bookkeeper should refer it back to you.
Finally, since communication and bookkeeping are of the utmost importance to any business, you should outsource to someone who is proficient at establishing an effective pipeline for recordkeeping, a system that can help you quickly pinpoint any problem that may arise.
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