Is your business bleeding money, and you don’t know why? Maybe it’s time you look at the accounts receivable that are unchecked and not collected. You may need to realize that the amount owed by your customers racks up to quite a lot of money that needs to be collected.
The way to circumvent this problem is to have dedicated resources on your accounts receivable.
There are so many companies that struggle with recovering their accounts receivable, and the main reason is that their processes are manual.
The human resources that go into collecting the debt need to be more focused and more motivated. Your best bet is to deploy automated AR software to help you manage outstanding payments more effectively. But before you do, make sure you have done the following things:
- Check your terms and agreements: If your customers need clear guidance on their payments, and they don’t, you can’t hold them liable for late payments. The first step is to look inside your collar and ensure you’re not neglecting your part. Check your agreements and terms and make sure they outline clear instructions on payment terms, due dates, and charges for late fees.
- Send Reminders to debtors: In most cases, if your debtor has forgotten to make payments, a simple reminder will reset the course. Take some time to send polite reminders to your debtors and encourage them to pay on time to avoid late payments and possible mounting debt.
- Provide regular invoices: Your customers need transparent communication from you when it comes to invoices and how much they are obliged to pay. Ensure that you generate proper invoices regularly sent to your customers so they can pay on time. These invoices should be concise and comprehensive and clearly outline the due dates, so they know of any late payment that needs addressing.
- Make direct contact: If the debt continues to pile up, contact your customers and talk to them. Please make sure they are aware of the late payment and the consequences of being sent to collections. Sometimes, reaching out with an honest conversation can open many doors, and you owe that much to your customer.
- Offer incentives for early payments: Nothing gets customers in the mood to cooperate like incentives and discounts, regardless of the nature of the business you are running. If you have an inkling that you can sway a customer with a discount, offer discounts for early payments to cultivate a habit of early settlement. This approach positively conditions your customer into paying early and avoiding debt.
How to Recover Accounts Receivable with More Force
If the situation calls for more drastic measures and you face a non-cooperative client, you might need more force. While this is not ideal, sometimes you must do what you must to ensure your business is not suffering from unpaid accounts. To ensure that your customers pay as early as possible, see if you can employ techniques that are a little more intense than basic reminders.
- Negotiate a payment plan: if a debtor has struggled financially, they will be unwilling to pay promptly. If you notice a pattern, take some time and see if you can offer payment plans that might be more suitable for you and the client to recover the debt owed. If there is a way, you should take it before taking more drastic measures.
- Hire a collection agency: sometimes, the situation may be out of your hands, and you might need to call outside help. In this case, reach out to a well-reputed collection agency and let them take the reins on the particularly challenging cases you have. Collection agencies have various strategies to extract the debt from stubborn debtors who will not budge otherwise with mild tactics.
- Take legal action: There may come a time when you will have to consider legal action against a debtor who is persistently late on payments. In this case, you can seek legal counsel to help you litigate the case and hold the debtor responsible for paying their outstanding amount. Consult an attorney and weigh out your legal options for these cases.
- Place lien on assets: Now we are moving into some severe territory! If debtors are stubborn and will not pay despite being able to, you can get a court order to place a lien on their valuable assets and property so they can’t sell it. Doing so will coax them to settle the debt as soon as possible.
- Publicize the debt: This would be the last arrow in the quiver. If you are facing constant refusal from the debtor or if they have been negligent with their payments, you need to take some drastic measures. If the payment is not made, you can report the debt to credit bureaus. Customers with multiple outstanding debts across various industries like medical, student loans, and housing often must be tackled this way. This kind of debtor will have a bad reputation in multiple industries and is best left to the big boys to handle.
Why the Noise Around AR Automation? The Benefits of Accounts Receivables Automation
While we are looking at multiple ways that debt can be settled, it is also essential to understand why accounts receivable are so crucial for the business’s health in the first place.
One of the main reasons that AR needs special attention is that it is an integral part of maintaining your cash flow.
When you manage your accounts receivable effectively, it can significantly improve your cash flow because the revenue caught in debt is free to be invested in other growth opportunities. Your company can spread its wings, so to speak, and soar to bigger, better things with the revenue generated from efficient AR management.
Another aspect is customer retention. When you offer credit options to your customers, they are most likely to stay in business with you for longer. There are multiple ways that you can retain customers but offering them credit solutions ensures that they feel empowered to engage with your business and return for more.
Now, if you consider the need to streamline your AR, the best solution that comes to mind is to let automated software handle the hassle that your workforce is running now. If you are struggling to meet your targets of recovering the owed debt, it’s time to let automation take a crack at it. You can use the services of software like Last Demand, which is built to ease the life of stressed business owners struggling to recover their accounts receivable despite their best efforts.
Last Demand handles the A-Z process of your AR management by carefully aligning and compiling all your active claims in one place. It then segments your debtors through the debtor intent into quadrants so you can easily view where and how your debtor is missing payments and, more importantly, why. The software generates automated reminders at regular intervals and reports the amount recovered. You get a clear idea of the amount collected and the amount left.
You get to efficiently process your AR without going through all the issues we discussed above. If this is the kind of ease you are looking for in your business, it is better to take the route of AR automation to help you revive your business.
Last Demand software allows you to free yourself to focus on growing your business by employing first-party collections strategies, so your revenue is recovered without the usual back and forth of chasing debt.
