Badly taken care of receivables is a typical cause of cash flow problems. Given that cash flow monitoring is vital to your business, you should not be too optimistic that all clients will pay their debt timely. Keep in mind that if your customers delay in making payments for items they got on credit, you may be compelled to utilise your company’s cash to fund daily operations.
As the debt aged, the opportunities for recovering your money rock bottom. Such accounts could then turn to bad debts – in other words, goods or services provided for free. Naturally, if you have more money in receivables, you are most likely to have less money to run your operation effectively (Also see Difficulties That Must Be Overcome by Start-ups To Succeed).
Below are possible methods to boost the collection from your accounts receivables.
On top of sending out email invoices to your clients to ascertain they obtain the billings in time, you may send them payment reminders. With that said, opportunities are you will undoubtedly get your payments early.
Paying Attention To The Accounts Receivables Frequently
Maintain records of your receivables as well as follow-up on any account that has long exceeded the credit term given. For companies that were supported by an accounting firm in Johor Bahru, you will obtain a receivable ageing record that shows the summary “age” of the unpaid invoices using the details we obtained throughout our accounting processes (Also see Affordable Solutions Offered to Business by Accounting Firms).
Tightening Your Credit Terms
Relating to the point above, you can think about tightening the credit terms for clients that tend to pay after the given credit period to either ensure earlier payment or lower credit risk.
Develop Credit Policies
If you decide to sell on credit, it is necessary to evaluate the consumer’s credit reliability and also his capability to pay. This will certainly aid you to prolong credit services to only customers who are most likely to pay as well as stay clear of uncollectable loans.
Give Them a Call
For the unpaid invoices, follow-up through call. Keep in mind that emails and paper letters are less efficient because they don’t engage the debtor in the discussion. Talk with the customer directly to learn if there could be any trouble in making payments. Additionally, a phone call can aid in persuading the customer to pay without spoiling your partnership with the customer.
Accounts receivables are necessary for every organisation in Malaysia as they have a direct effect on the cash flow for every organisation. For that reason, it is essential to embrace good practices when dealing with the receivables to ensure that you make money in time (Also see Factors to Consider Before Selecting a Bookkeeping Service).