Creating a watertight accounts receivable process

In business, it doesn’t get much more important than making sure your customers pay you.

And accounts receivable is all about getting paid for the work you do – in business.

It’s not exciting, but it’s important.

The accounts receivable process covers every part of your payment lifecycle. From finding customers to communicating expectations to billing correctly to following up on late invoices.

Building an accounts receivable process

So, how do you to build an effective accounts receivable process in your business?

The right customers

First, you need to work with the right customers and clients.

Before taking on customers, make sure you run credit checks. It’s also important to have them sign written terms, including billing timeframes and late payment penalties.

If you are comfortable doing so, you can also ask clients to sign a personal guarantee. This gives you the option of suing for an unpaid debt.

Effective invoicing

It’s vital that you always send invoices straight after the work is completed. This gets the payment ball rolling.

Make it as easy as possible for your customers and clients to pay you. You can do this by offering options like debit, credit or direct debit to.

Dependent on the apps you and your customers use, you may be able to set up to send e-invoices directly to your customer’s accounting or finance software.

Following up

Make sure you keep a close eye on your invoices. Make frequent and regular checks that payment has been made.

Have a process to follow up if an unpaid invoice is past its due date. This can be an automated process using cloud accounting software to send email reminders and statements. If that is unsuccessful included phone calls and consider debt collectors in your process.

Reviewing

For any customers that regularly pay their invoices late, consider changing their terms. Perhaps split your invoices and ask them to pay half upfront. Or suggest another payment method.

If there is not change to their late payments after changing their terms, you might consider letting them go.

Consistency is key

At the end of the day, having a watertight accounts receivable process is all about consistency.

Follow your process every time.

• Select the right customers
• Have clear policies and prompt billing
• Ensure thorough follow-ups and reviews

Automating your process as much as possible ensures consistency. And being consistent in your process reduces the risk of unpaid bills and rogue customers.

If you’re ready to create an effective payment process talk to us about how we can help.

Xero's short-term cashflow feature for businesses

Business cashflow is simply money coming in and money going out of the business. Your outgoings will include things like rent, payroll, taxes and supplies. Your income will be revenue from sales but might also include investment funds or the sale of assets.

For most businesses, income and expenditure don’t always happen at the same time so focussing on strong cashflow management will help you prepare for the shortfalls and also manage surplus income.

Cashflow reports allow you to look back at cashflow in your business. This can uncover cashflow patterns over time and show you how much money you need to run your business each month.

Cashflow forecasts look forward by combining payment dates and due dates for invoices, to give you an idea of what your cashflow will be like going forward.

Managing healthy cashflow

Xero’s short-term cash flow feature gives you an up-to-date dashboard view of your organisation's cashflow. You can choose multiple bank accounts and see the projected cashflow over 7-30 days. The more information you include, the more accurate your forecast will be.

Healthy cashflow management gives you better control, so you are more prepared for growth or for the unexpected. Read the article at Xero Central to learn more about this feature.

We can help. Talk to us about improving your business cashflow.

Lessons learned in lockdown – for your business and life

Lockdown has been (and remains) a tough time for business.

Having to shut your business at short notice, or switch to an entirely digital, remote-working model, was a stressful experience. But there are things we have taken out of lockdown. Whether it enabled us to explore new ideas or dive into some fresh thinking regarding work, life or a business venture.

So, what lessons did we all learn from this enforced period of business shutdown, quarantine and remote working?

Carrying over the positives from lockdown

Suddenly, your office space lay empty, your employees were spread across various home locations and (crucially) your customer sales and revenue evaporated in the blink of an eye. The amazing thing about human resilience and ingenuity, however, is how quickly businesses DID evolve to cope with this situation.

Teams got used to home-working, video meetings and dealing with customers in the online space. And many of us began to see the positives of this low-impact, remote-working approach.

Are there things you can hang to now in the return to working life?

More time with family

With the daily commute no longer needed, and the ability to work remotely from our own homes, everyone had far more time to spend with their family, their partner or (via video calls) their wider circle of friends and family. Although enforced time together may have added a few strains, this extra time with our nearest and dearest is something we are grateful for – and should aim to continue.

More exercise and fitness time

finding the time to fit in a gym session or run was always tricky. The quieter pace meant that many could follow the latest workout video, go for a run, or get back on our bikes. We know exercise is good for both our physical AND our mental wellbeing - so it's important to keep this in your daily schedule going forward.

Future planning

working ON the business, rather than IN the business is an aspiration of any ambitious owner, but the time to do this is usually scarce. In lockdown, we’ve had far more time available to think through our core goals, what our next move should be and what our ‘post-coronvirus strategy’ should be.

Using data to understand your customers

Intuition is vital for business owners but if there’s data in your business that you haven't had the time to review, you may be missing opportunities. For some, lockdown provided some time for analysis such as, learning to use Google Analytics to understand how your customers find you, what your popular pages are, and which products are selling.

Getting in control of your financial model

 Huge drops in revenue have meant cashflow worries. We've been assisting clients to re-evaluate their financial model. Looking at costs, debts and potential revenue streams allows you see how you can reduce cash outflows and boost those all-important cash inflows. Reporting on these metrics will continue to support your business decisions.

None of us know exactly what the ‘new normal’ of business trading will look like. But if you want to be ready for a different kind of business reality, we can help. We’ll work with you to update your goals, strategy and financial model – so you’re ready for the future.

Talk to us. We are here to help.