You probably hear a lot about prevention in your daily life: preventive maintenance, preventive health care, preventive safety. Believe it or not, your ability to stay proactive in accounts receivable management can prove as valuable as your annual physical at the doctor’s office and your home’s yearly rendezvous with the termite-control company’s technician.
A Bad Taste in Your Customers’ Mouths
Hate going to the dentist? You’re not alone. But you go to prevent future problems.
Reactive accounts receivable management can cause serious pains — both for you and your customer. Not only do you have to put forth more effort to collect what you’re owed, but your customer will likely resent your efforts and write you off as a future business partner.
This doesn’t mean that you can’t pursue unpaid debts. On the contrary, you should always use courteous debt collection to recover your money. However, if you start with a proactive approach, you won’t have to take that route as often, which can lead to better customer relationships.
If you’ve ever received a phone call or letter from a debt collector, you know exactly how your customers feel. It’s embarrassing, even if you simply forgot to pay the bill, and some companies are more tactful than others.
Catastrophe Waiting to Happen
There’s a reason parents child-proof their homes.
If you stick to reactive accounts receivable management, you’re forced to put out the fire before it starts. You’re just waiting for a customer to default on his or her bill, at which point you must start the debt collection process.
Plus, even businesses can make mistakes. A simple accounting error might result in a collection letter, so you don’t want to burn unnecessary bridges. For instance, older consumers complain that they’re approached about debts they don’t owe.
Preventive Maintenance for Cash Flow
So what is proactive accounts receivable management? It’s a strategy that helps you maintain positive cash flow as well as business relationships.
First, you need clear billing practices. Although it’s written for lawyers, an article published by the American Bar Association offers simple but helpful tips that any business can use for establishing better billing procedures. Getting the contract in writing and creating detailed invoices will help you collect money faster.
Second, monitor your accounts closely. Partner with an expert agency that can analyze your data and predict whether customers will pay or not. Focus on doing business with qualified customers who settle their debts on time.
Third, approach collections cautiously. An experienced debt collection agency can improve your chances of collecting what you’re owed and avoid irritating customers in the process.
Want more accounts receivable management tips like these for your business? Sign up today for e-Tips from Rocket Receivables.