Preventing past due accounts is a key strategy for business success. Past due accounts cut down on your cashflow. It can cause serious problems with your business. Additionally, the longer that an account remains unpaid, the harder it is to collect on it. In this post, we’re going to explain 6 ways you can prevent past due accounts.
Make Sure You’re Using a Credit Application
If you provide a line of credit to your clients, make sure that you use a credit application. It’s important that you’re only providing a line of credit to people or businesses who are creditworthy. You should follow-through on checking their credit and calling any references. This can help you determine how much credit, if any, you should provide.
Do Not Provide Services Until Full Payment Is Received
A classic way to prevent past due accounts is to require the client to render a full payment before you provide services. Clients ARM provides a free service to help your clients get the money they need to pay you in full. You can learn more about this free service by clicking here.
Use an Easy to Understand Invoice
Your business should use an invoice that is easy for your clients to understand. At the very least, it should include the client’s name and address, an account number or a client matter number, the date that services were rendered, the amount that the client owes, and the date by which the client should pay. Don’t use terms like “net 5,” “net 15,” or “net 30” unless you’re dealing with another business who will understand what those payment terms mean. Instead, just list the date that the payment is due.
Send Out Invoices on a Regular Basis
If you want to prevent past due accounts, you should send out invoices on a regular basis. It’s difficult for clients to plan out their payments if they don’t receive an invoice when they should. If you bill every week, pick one day of the week to generate and send out invoices. If you bill biweekly, pick a day and stick to it. If you bill monthly, pick a date, such as the first of the month or the last day of the month, to create and send out invoices. When clients know when they can expect to receive their invoices, they are more likely to pay on time.
Follow-Up the Day After an Account Is Past Due
Remember, the longer that an account remains unpaid, the harder it will be for you to collect on it. Do not allow past due accounts to just sit and collect dust. The day after an account is due, make a courtesy call. This call is to make sure that the client received their invoice and to ask if they have any questions about their invoice that might be stopping them from paying. You can also take a payment over the phone. If the client can’t pay, make a note to call them back.
Provide Convenient Billing and Payment Options
The postal service isn’t always reliable. Of course, spam filters may be aggressive and move an invoice into the spam folder. There is no perfect payment method outside of not providing services without payment in full. Yet, providing convenient billing and payment options can mean that you’re better able to prevent past due accounts. Clients may choose to receive their invoices via email or postal mail. Depending on the AR software you use, they may be able to log in to their account and see their invoice and make a payment.
Past Due Accounts Getting You Down? Contact Clients ARM for a Free Consultation
At some point, most businesses will deal with past due accounts. If you’re struggling to collect for any reason, contact Clients ARM for a free consultation. We have a collections rate of better than 90%.
