Getting companies to pay invoices can be hard sometimes, especially if they’re a large multi-faceted client with multiple departments and teams of people to work through when you’re trying to square off your outstanding accounts receivables. This is a tricky scenario that requires careful steps to resolve.
While you are deserving of the money you are owed, you need to be careful about fostering your relationships with clients so you don’t cause problems down the road. If you’re too forceful in demanding payment, you could damage important business relationships that were otherwise going well.
With that in mind, here are 5 smart ways to reduce outstanding accounts receivables!
1. Use AR software with automated features
There are so many automated invoicing systems these days which make it easy for companies to invoice their clients automatically in a very cost-effective manner. Software for accounts receivable with integrated payments usually features automated reminders for invoice payments, gently reminding the client without seeming too invasive on your end.
You aren’t personally sending the reminder, so it seems less threatening.
It’s generally a good idea to send these automatic reminders a week or so BEFORE the due date of the invoice rather than afterwards when the payment has been delinquent for a few days. This reminds the client to pay you on time without the need for awkward intervention ever arising.
2. Send invoices quickly
Instead of waiting for weeks or months after a job has been completed to send your invoice to the client, send it as quickly as possible. Ideally, you should send out invoices as soon as the specified work is complete.
Makes sense, right?
People are more likely to pay quickly for things that have just been completed, as the work you’ve done is still fresh in their minds. As the weeks and months roll on, paying an invoice for that work completed a long time ago will seem like less and less of a pressing issue.
3. Contact specific team members for payment
People like to deflect blame from themselves as individuals and place it onto someone else or their team as a whole. This “it wasn’t me” attitude is the bane of many businesses across the globe.
When you’re chasing up your AR, consider finding a specific person who works in the relevant department of your client’s business and ask for them specifically when chasing up invoices.
People are more likely to actually complete tasks when they’re called upon specifically as opposed to part of a larger, vaguer team.
4. Get on the phone and stop emailing
If your invoice has been outstanding for longer than you’d like and written correspondence is no longer getting the job done, consider getting on the phone and physically speaking to someone at the business who can help.
Speaking to someone on the phone demands their immediate attention from you, whereas letters and emails are much less personal and easier to ignore. Sometimes you need to get on the phone to make some real progress and hold the person on the other end of the line accountable for solving your AR issue.
5. Make your payment terms very clear from the start
Try to avoid terms like “payment due upon receipt”. While it’s self-explanatory, it’s overused and quite vague, leaving it open to interpretation for many clients. Instead, try to use specific numbers of days and weeks to talk about your payment.
“Due in 2 days” sounds much more demanding than “due upon receipt”.
Hopefully you enjoyed these tips for reducing outstanding accounts receivables! From software automation to basic psychological tricks, hopefully some of these tips can help your business reduce its AR backlog.