We see the same mistakes over and over again in account receivables departments that complain of constricted cash flow. Even being aware of these habits can prevent headaches down the line.
Mistake #1: No reminders
This is the biggest one so we will get it out of the way. Always send reminders. Every time. Even if the client has paid early for 30 years, send her a polite reminder a week before the invoice is due anyway. It shows you’re on top of things and you get in the habit of always sending the reminders.
Mistake #2: Treat Accounts Receivable as a Transaction
This is a common attitude toward accounts receivable. The companies that treat the money flowing from one company’s Accounts Payable to another’s Accounts Receivable like a transaction will have many more issues than the company who treats it as a relationship. Treat at something to be maintained or nurtured and you will start seeing the results in more prompt payments.
Mistake #3: Staff (especially salespeople) Don’t Know the Credit Policy
All customer facing employees should know your credit policy. A print out to tack to the cube wall for all new hires will save a lot of time and pain later on. When your employees don’t know the credit policy can come off much more flexible and there is too much room for confusion.
Mistake #4: Credit Policy Hidden on Website
Don’t hide your credit policy! It’s like hiding your contact information or your pricing. Lots of people do it and it always causes problems or loses business. Post your credit policy prominently on the appropriate page of your website. That way prospects know up front what they’re considering. There won’t be any surprises or “oops, I didn’t realize it was x, y and z.”
Mistake #5: Ignoring References/Credit Reports
Credit reports exist to help you make good business decisions. Use them. Asking for references from other vendors the company works with is a standard practice that is largely not followed up on. Most employers call the references of potential employees to make sure they do what they say they can do. It is even more important to check the references of business that will be paying you for your efforts.
Max Golovnia | Co-Founder & CTO
Armatic Technologies, Inc.