Last time we talked about Steve’s Dilemma: Invoice rich, but cash poor. One of the things Steve started doing was getting his accounts receivable systems in order. Not just bookkeeping, but the actual accounts receivable system that involves invoicing, monitoring receivables, receiving payments, and addressing balances.
Getting paid is important. After all, they’ve already sold and earned money, so Steve figured it was worth his time and money to invest in this aspect of his accounting department.
What seems to be a problem
Off the bat, Steve realized that there is no real system to the way they are invoicing or staying on top of what’s being collected. The sales team, office manager, and Steve invoiced whenever they could and the bookkeeper recorded what was received on a weekly basis. Information was kept everywhere: on the billing system, in QuickBooks, some Google Docs, and even a few Excel files.
Digging through some records, Steve found several invoices that had slipped through the system and were never sent to the customers. Naturally, the invoices were never paid, so he put his attention, first, to cleaning up house and making sure there are a system and methodology in place on how things were being recorded, sent out, and followed up on. The software used to do this was consolidated and everyone got a role that they were in charge of. The collective goal for the company? To collect everything that’s owed to them on a systematic basis.
How to get paid faster
First step: Having a system
Having a system means that you need to define your terms and make your client aware of them from day one. Invoices aren’t sales orders; your clients need to be aware of how frequently you’ll bill them, your payment terms, and any other related details.
Second: Track and reconcile payment
You need to make sure you are tracking and reconciling payments, and monitoring accounts that are delinquent. Again, having a system for what to do when an invoice comes in ensures you are on top of your income.
The day-to-day of running a business can be exhilarating and exhausting, all at the same time. Creating systems will relieve some of the things that exhaust you and ensure you are not relying on a specific employee to get the work done. It took Steve a few months and some help to get everything going, but by systemizing his AR effort, he was able to recover a few large invoices that slipped through, collected a few old invoices, and is now getting paid faster by his clients on an on-going basis. Need help with building process? Contact us