5 Tips to improve your company’s receivables collection (FAST)

The year has just started but we all remember the Q4 crunch. Businesses often find themselves at year’s end struggling to collect a lot of outstanding invoices in order to meet annual cash flow projection and other cashflow/collections related metrics.
Here are 5 tips that will help you to get results fast (but not a substitute for a healthy collections process management):

 

I. Map out everything that’s outstanding – hopefully, you have all the information in your ERP. Pull the A/R report and review it. Be mindful of high balances, new clients and old invoices. For larger organizations, it is important to be aware of all subsidiaries the company has and any large upcoming deals that are expected to be signed by the end of the year.

II. Score invoice/balance based on payment expectancy – what’s better? $100K invoice that has 30% to be collected (score 30), or $50K at 90% (score 45)? You can never know for sure if you haven’t collected elaborate statistical data for a few years, but your estimate will be accurate at scale.

III. Concentrate your efforts only on the highest scored items – your time resource is limited (remember that there are only so many days by the deadline set), so you will have to determine how many clients you can engage in that time frame. Once you know how much effort you can put in, take the accounts with a top score and work them exclusively.

This assures the best expectancy and gives you the best chance to meet your goal.
IV. Collaborate with your colleagues – the finance team can only do so much alone. Sales, account management and C level executives are a great resource. Many times, a client will withhold payment because something is pending resolution. One quick call from an executive can help your client approve an invoice for payment and you meet your target. Keep in mind that non-finance people will need extra guidance and context for your requests to be effective.

V. Monitor periodically – if you have more than a week to meet the deadline, make sure to have a periodical meeting, get status updates and resolve any problems ad-hoc. You might increase the frequency as you near the deadline to be better calibrated for success.

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