Accounts receivable management plays a crucial role in maintaining healthy cash flow levels within your business. Your landscape business could be achieving high profits, but if too much money is tied up in receivables, you won’t have funds to meet liability and expense payments. These are 21 tips to help:
- Invoice early and often: Invoicing late means the customer has another excuse not to pay you on-time and may view you as unprofessional.
- Process invoices electronically: There are cloud-based applications and software’s available to invoice electronically. This helps to organize and systematize this process.
- Clear communication and expectations: Clearly outline the terms and payment details form the start, this will help to reduce any problems in the future.
- Clear process for invoicing and collections: You may have team members that handle accounts receivable functions. They are not mind-readers, make sure there is specific expectations, directions, and processes in place for them to follow.
- Implement progress billing: For some larger landscape projects it may make sense to get paid multiple times throughout the duration of the project.
- Implement automatic reminders: Many processes within your landscape business can be automated, implement an automation sequence for invoice reminders to customers.
- Allow online payments: Make it as easy as possible for customers to pay you.
- Implement auto payments (when possible): This is especially useful for any recurring services. Set the customer up with an automatic ACH or credit card payment on the first of each month.
- Use a Credit Limit: Start at a conservative level with customers, and advise them they can work their way up to more flexible terms.
- Set reminders: Set reminders for you and your team to email or call customers in regards to different accounts receivable scenarios.
- Incentivize: Reward your customer for paying quickly. The improvement in cash flow as a result could outweigh this incentive/reward, do the analysis!
- Review accounts receivable aging report: This report shows you the length of time an invoice has been outstanding. Your accounting software should have the capability to generate this report.
- Call and text the late payers: Businesses receive many emails per day. To ensure your message gets attention, call and text the customer.
- Implement penalties/fees: There needs to be action taken against customers that pay late. Make this clear to the customer upfront, and it may even discourage them from getting to this point!
- Establish yourself as a client who can’t be paid late: The clear expectations, processes, and systemization of managing accounts receivable will all help to show the customer that this is a priority for your company.
- Be Professional: Approaching the customer in a respectful and professional manner will go a long way in the accounts receivable process, don’t let your emotions take-over!
- Installment Plans: Some customers may not be paying you because of their cash flow issues. Try developing a plan for them to pay you over a specified period. This is better than not getting paid at all!
- Utilize outside help: Alert credit bureaus and a debt collection services if needed.
- Write off A/R: Clean up your accounts receivable and make a note not to do business with those customers moving forward.
- Don’t let clients bully you: You are not a bank, if companies owe you money, don’t let them bully you.
Accounts receivable management is not something you want to procrastinate or delay; your cash flow depends on it! Take back control of this process and make it a priority.