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Everyone wants to be paid for their services, right? We don’t like to call and remind the client to send the check daily. We want our clients (Affiliate Link) to be trustworthy and pay when the bill is due. At one time or another, we all have dealt with someone paying late. It makes us feel unappreciated. Doesn’t it? I know it does for me. To help you minimize your accounts receivable issues, I share these nine(9) things every owner needs to know about accounts receivable.
Tip: Visit U.S. Small Business Administration for tips on managing your finances in your business.
Table of contents
- Accounts Receivable Improvement Ideas
- Late payment charges are OK to add to past-due invoices.
- Schedule time once a week to invoice your clients.
- Use an app to track your time, making invoicing a lot easier.
- Establish a Terms policy.
- Create a policy of when you will follow up on unpaid bills.
- Be consistent with following up.
- Have a place for your unpaid invoices and a place for your paid invoices.
- Change your mindset about making your accounts receivable.
- Know when you need help getting your money.
Accounts Receivable Improvement Ideas
Late payment charges are OK to add to past-due invoices.
Be sure to inform the client of this late payment charge before you start the job. Tell your clients (Affiliate Link) verbally before you start, and then in written form on the invoice works nicely. You can also inform them that the bill is past due when you follow up.
Schedule time once a week to invoice your clients.
Picking a day, say Friday PM or even Saturday morning, will keep you on track with invoicing. I have some clients (Affiliate Link) who haven’t invoiced their clients (Affiliate Link) for a month or so, and now they are behind. So, keep on top of this process, even if you don’t need the money at the moment, because you will be short sooner or later. Also, doing this task regularly will remind you what you have done in the past week.
Use an app to track your time, making invoicing a lot easier.
There are many apps out there to track your time so you can then import it into your invoice software. QuickBooks Pro has a nice Timesheet embedded in the app to help with quick invoicing when needed.
Establish a Terms policy.
This is when you determine how long the customer will take to pay the invoice. It could be net 15 days, net 30 days, or even upon receipt. Make sure it appears on all the invoices and contracts.
Create a policy of when you will follow up on unpaid bills.
This could be a week after the due date or two weeks after the due date.
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Be consistent with following up.
Schedule a recurring appointment each week to remind you to visit your accounts receivable area in your financial management software and see if there is anyone you need to contact.
Have a place for your unpaid invoices and a place for your paid invoices.
There are a couple of ways you can do this. You can have one folder for all your paid invoices and one for your unpaid invoices. However, if you send many invoices to each client, your folder will get large and be challenging to manage. For this situation, I recommend dividing up and storing each client’s PAID invoices in its client-named folder. This way, at the end of the year, if there are any questions on an invoice, you can go right to the specific client and check out their invoice quickly and easily. You can combine both of these ideas if you wish. For example, if you have a client with 1 or 2 invoices, you can have a Misc: paid invoice folder to hold the once-in-a-while paid and unpaid invoices.
Change your mindset about making your accounts receivable.
You deserve the money! Even if it is easy for you to do what you do, you deserve to be paid on time for your talent. Your business is part of you, and you must advocate for yourself and your business.
Know when you need help getting your money.
Having a good collection agency on hand will help on those rare occasions when you need to contact them about a way past due invoice.
Well, there you have it! These tips help make your accounts receivable process run more smoothly and efficiently.
If you are looking for help with your accounts receivable and accounts payable processes, please check out our Accounts Receivable and Payable Services page and contact us today to see how we can help you!
Now, it’s your turn. Do you have any tips that will help other readers? Please share your tips below. I would love to hear from you.
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Thanks for sharing this. For me getting my accounts in order is one of my most loathed tasks so it tends to get put on the long finger. I definitely need to systemise it. I like the idea of allocating a day a week for the work (or at least an hour a week).
I love your point on deserving the money too. I think when we don’t get paid we tend to think that the other party was dissatisfied with our work. It’s not us at fault it’s them and it’s good to remember it.
I’ve always worked from the point of being paid upfront. I couple of time I’ve either reduced the fee or took time payments. But I can sympathize with those in businesses where they have to accommodate an invoice system. Definitely, need to stay on top of it. Good advice for doing so.
As a healthy coach I do not do the coaching unless I am paid first. I just don’t need the headache of collections. It has worked well so far, but what great tips for those who do need to invoice and collect for sales. Most of us don’t do what we do because we want to deal with these types of tasks, but they are critical to a profitable business.
These are great points and I will be sharing. Re online time-tracking: I used Paymo for a while (and turned my bookkeeper on to it) but now am using Toggl. I like both of them. One suggestion I would make for those who are charging by the hour — round up. If you’ve worked for a client for anything longer than 5 minutes in each quarter hour, round up to the nearest quarter hour. You know you deserve it.
Hi Sabrina,
These are fantastic tips and very important as a business owner to make sure you get paid for services rendered 🙂 Being organized with all of the paperwork is a must!
Great share!!
Things we need to know and do. Thank goodness I keep up on these even though not my favorite tasks it does feel good to me have good money management. I believe it helps create abundance.
Having a firm policy in place and being consistent is everything! I love that you remind us that we DESERVE to be paid!
My business is a bit different as our eCommerce site collects payment. We don’t ship until the credit card has cleared. But I was a P/T bookkeeper in my x husbands business & know how important it is to keep good A/R. It can really hurt you if you have too much money outstanding.
Thanks for these tips Sabrina. I/we are doing all except tracking my time via an app. But then, my two corporate clients are my bread-and-butter and those hours are fixed.
I use an invoice system that automatically bills and then reminds… then I work through my bills each week… the rest goes to my tax person to take care of the rest… This is important, thank you!
I know a few young self-employed people who have been ‘stung’ by customers who refuse to pay on time and it really impacts on their confidence, as well as their budget. I think being upfront about charges and late fees right from the start is vital. I know a lot of people tend to put off bookkeeping because it’s boring but it can become an unmanageable mess quite quickly. These are great tips for staying organised.
Everything you mention makes a lot of sense, Sabrina. I do so much by hand and keep notes and notebooks, that maybe I would be wise to step up and find an online app where I can at least record some of these things. Somehow doing everything longhand and in writing still appeals to me though. A lot of these issues I don’t have to address, mainly because of how my business life is already set up. Great reminder this post though! Money issues seem to always eat up a lot of time for so many of us.
I needed this post. I love the reminder to set up a recurring appointment with yourself to review your receivable files. I’m going to put it on my calendar now!
Great tips, Sabrina! I model my coaching practice on my previous career as a dance instructor – strictly paid in advance, thank you very much! So grateful to have a bit less paperwork to worry about since that is definitely not my forte!
I don’t sell a product, so I don’t deal with accounts receivable. But I have friends who work in AR at major companies, and these points are so right on. Some of the stories I’ve heard about the messes they have had to clean up is pretty amazing.
Sabrina,
Good Article and yes we all want to be paid for our services, and I liked the importance you stressed on mindset. Nice tips.
Lori ENglish
You deserve the money is such an important point for sure. I started using Toggl on Google Chrome to track my time. It is extremely handy and useful. These are some great tips.
Your timing couldn’t have been better for me, Sabrina. I rarely have unpaid balances, but when I do, I struggle with how to handle those. This truly helps me! Thank you!