Tips to Maximize Billing and Collection Processes

Your guide to Accounts Receivable 👇 Ever wondered what REALLY happens when a customer owes you money? Let's dive deep into Accounts Receivable (AR) - the lifeline of your business's cash flow. ➡️ WHAT IS ACCOUNTS RECEIVABLE? Simply put, it's money customers owe you for goods or services they purchased on credit. But here's what most people don't realize... While you might have amounts owed by banks or owners (those go into different accounts like notes receivable), AR is specifically for customer balances. Don't confuse this with Accounts Payable - that's when YOU owe money to others. Remember: - You send INVOICES to customers - You receive BILLS from vendors ➡️ WHY AR MATTERS? 💸 Direct Cash Flow → Your receivables convert straight to cash, unlike inventory that just sits there 💰 Cash Flow Impact → Long collection cycles can absolutely destroy your working capital ⚠️ Risk Management → Large AR balances mean increased bad debt risk (I've seen this sink businesses!) 📝 Customer Terms → While customers need flexible terms, you need a robust system to manage them 📈 Growth & Stability → Efficient AR management is what fuels your business expansion ➡️ THE ACCOUNTING BEHIND AR Here's where the magic happens (and yes, accounting can be magical! 😉) When you issue an invoice: - Debit Accounts Receivable - Credit Revenue When you finally get paid: - Debit Cash - Credit Accounts Receivable ➡️ TECHNOLOGY IS YOUR FRIEND Stop doing this manually! Here's what modern AR software can do for you: - Automated invoicing - Real-time payment tracking - Built-in reminders - Integration with your accounting system ➡️ PROVEN STRATEGIES THAT WORK 🤝 Friendly Approaches (Try These First!): - Request payment upfront whenever possible - Collect credit card/banking details for autodebit - Follow up consistently (trust me, the squeaky wheel gets paid!) - Request credit references before extending terms - Offer early payment discounts (like 3/7 net 30) ❌ When Friendly Doesn't Work: - Stop service if payment isn't collected (just like your electric company!) - Send the account to collections (yes, you'll get less, but something is better than nothing) - Take legal action (last resort, but sometimes necessary) ➡️ CRUCIAL METRICS TO TRACK These are the numbers you NEED to watch: 📊 Days Sales Outstanding (DSO) Formula: (AR / Net Credit Sales) * Number of days Lower is better - it shows how quickly you're collecting! 📈 AR Turnover Ratio Formula: Net Credit Sales / Average AR Higher is better - shows how many times you convert AR to cash 📉 Bad Debt Expense Ratio Formula: Bad Debt Expense / Total Credit Sales Lower is better - shows how much you're losing to bad debt === The way you handle AR can literally make or break your cash flow. I've seen businesses transform their entire financial position just by getting better at managing their receivables. What's your biggest AR challenge? Let me know in the comments below 👇

Collecting money is a pain in the a**. I’ve tried every fancy debt collection system. Nothing works as well as this painfully simple strategy: 𝟭. 𝗣𝗲𝗿𝘀𝗼𝗻𝗮𝗹𝗶𝘇𝗲𝗱 𝗥𝗲𝗺𝗶𝗻𝗱𝗲𝗿 𝗦𝘆𝘀𝘁𝗲𝗺 Don't let automated messages do the talking. Personalize your reminders with a friendly, human touch. A simple, personalized email or call can make a world of difference in getting those overdue payments settled. 𝟮. 𝗜𝗻𝗰𝗲𝗻𝘁𝗶𝘃𝗲-𝗕𝗮𝘀𝗲𝗱 𝗥𝗲𝗽𝗮𝘆𝗺𝗲𝗻𝘁 Motivate your clients to pay on time by offering small discounts or benefits for prompt repayments. It's a win-win; they save a bit, and you get your dues faster. 𝟯. 𝗧𝗿𝗮𝗻𝘀𝗽𝗮𝗿𝗲𝗻𝘁 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗶𝗼𝗻 𝗣𝗿𝗼𝘁𝗼𝗰𝗼𝗹 Clear, consistent communication is key. Establish a protocol for transparent communication about debts — it reduces the risk of misunderstandings. Ensure your clients know exactly what they owe and why. 𝟰. 𝗖𝘂𝘀𝘁𝗼𝗺𝗶𝘇𝗲𝗱 𝗣𝗮𝘆𝗺𝗲𝗻𝘁 𝗣𝗹𝗮𝗻𝘀 One size doesn't fit all in debt repayment. Tailor payment plans to individual client circumstances. This flexibility often increases the likelihood of repayment and ensures you meet the needs of all clients. 𝟱. 𝗥𝗲𝗮𝗹-𝗧𝗶𝗺𝗲 𝗗𝗲𝗯𝘁 𝗧𝗿𝗮𝗰𝗸𝗶𝗻𝗴 𝗗𝗮𝘀𝗵𝗯𝗼𝗮𝗿𝗱 Use a simple, user-friendly interface where both parties can monitor outstanding debts. It ensures everyone's on the same page and provides an easy way to keep track. 𝟲. 𝗙𝗿𝗲𝗾𝘂𝗲𝗻𝘁 𝗨𝗽𝗱𝗮𝘁𝗲𝘀 In the most non-intrusive way possible, keep clients informed about their debt status with regular updates. These reminders keep the debt on their radar, but it's your job to ensure they're not overbearing. 𝟳. 𝗘𝗺𝗽𝗮𝘁𝗵𝘆 𝗧𝗿𝗮𝗶𝗻𝗶𝗻𝗴 𝗙𝗼𝗿 𝗖𝗼𝗹𝗹𝗲𝗰𝘁𝗶𝗼𝗻 𝗦𝘁𝗮𝗳𝗳 Nobody likes being pestered about their debt. Handling it too aggressively can leave a bad taste in the client's mouth. Train your staff to focus on empathy and understanding. This equips them to preserve client relationships even in tough financial situations. Debt collection doesn't have to be complex or aggressive. This simple strategy has been a game-changer for me. Use it and get that bag!

The phone is ringing with clients asking for your help. Revenue is increasing. Your associates are working very hard. You meet deadlines, deliver great work products, and answer all questions. And still… Cash flow is negative. You have more bills to pay now—including payroll—than you have money to cover them. You ask your accountant or CFO for help, and they tell you to do a 13-week cash flow forecast. Before you even bother, you know it will forecast negative cash flow for the next 13 weeks! I had a heated exchange with a CFO and self-appointed cash flow expert last week. He lists more than 100 ways to generate cash. But… He ignores the single most powerful, reliable, and everlasting way to improve cash flow. What is that? Your firm’s terms and conditions. When your terms and conditions require payment in advance you will never suffer from negative cash flow. Terms and conditions are part of your offers. Most professional and business services firms focus on what clients want and the tasks required to give the client what they want. The outcome of this focus ends up in a proposal. The proposal has a scope or list of the tasks. Even when the price or fee quoted is a flat fee, such as: ·       A lawyer with a flat fee for forming an LLC. ·       A mediator with a flat fee for a mediation. ·       A trainer with a fixed fee for a training session or class. ·       A PR company charges per piece written. ·       A compliance expert charges for each system they evaluate for compliance. The terms and conditions require payment after completion of the work! And the terms usually are 30 days. Which means your firm does work today, sends the invoice on some (later) date built into your invoicing system, and then gives the client 30 days to remit payment. You are causing your own negative cash flow! These two changes will create positive cash flow: 1) Terms and conditions require payment in advance. No ifs, ands, or buts. Without payment in advance, you do not do the work. If a client or prospect objects, they are a poor fit client. Let them go. 2) Change your pricing model to one that is not based on an unknown variable such as hours worked. My preferred pricing model is IMPACT Based Pricing that reflects the life changing differences you deliver to your clients. A helpful transition to or substitute for IMPACT Based Pricing is simply charging a fixed or flat fee. You are experienced in the work you do. You know what is involved in 99% of the work people hire you for. Set a fixed price and use it for a month. If you feel it’s not the right price, change it. Create positive cash flow. You have ALL the power to create positive cash flow. --Your pricing model --Your terms and conditions. --Your invoicing system When was the last time you looked closely at your proposals and your terms and conditions? If it’s been a while, it’s time for a fresh look. DM me to talk about a next step. #termsandconditions

I don’t want to chase payments! This is what a business owner told me about his business a few days ago. As a business owner, you know how important it is to have cash coming in regularly. One thing that can really disrupt your cash flow is accounts receivable - The money customers owe you for products or services. If you're not staying on top of accounts receivable, it can lead to not having enough cash to pay employees, suppliers, and other bills. This can hurt your business's reputation and stop it from growing. But there are some good practices you can follow to manage accounts receivable better: -> Set clear payment policies from the start with customers. -> Use an invoicing system that bills accurately and on time. -> Communicate openly with customers and follow up quickly on late payments. -> Offer incentives like discounts for paying early. -> Regularly review aging reports to catch payment issues early. Get control of your accounts receivable now and make sure your business has the cash flow it needs to succeed. Are you confident your accounts receivable process is running smoothly? If not, it's time to take a close look and make any needed improvements to protect your business's financial health. #accountsreceivable #businessaccounting #finance

You think you’re profitable…  But your bank account tells a different story. Managing cash flow can feel like a constant puzzle. Late client payments strain your resources, while vendor bills pile up, adding to the pressure. As a result, your business decisions slow down, and growth opportunities slip away. The constant worry about cash impacts your leadership, while delayed supplier payments damage relationships and late fees continue to eat into your profits. But you don’t need to worry more! You can fix this and master your cash flow. By two strategies: 1. Accounts Receivable Strategy: - Send invoices immediately after service - Offer early payment discounts - Set clear payment terms - Follow up consistently - Use digital payment options 2. Accounts Payable Management: - Negotiate favourable payment terms - Track due dates systematically - Take advantage of early payment discounts - Maintain vendor relationships - Plan payment schedules Think of accounts receivable as your accelerator and accounts payable as your brake. Balance them well, and your business runs smoothly. You'll transform from constantly checking bank balances to confidently making business decisions. #accountsreceivable  #accountspayable  #finance  

A lot of CFOs will try to fix your cash flow problems on the back end by selling you cash flow forecasting services. Like a chiropractor, they’ll keep you coming back for maintenance, but they never actually fix the underlying problem. While there are some business models that require a lot of “cash maintenance”, for many businesses, cash challenges can simply be fixed by addressing the problem on the front end. By automating the way you get paid. Imagine this…. 1. Proposal is electronically signed by customer  2. Customer is taken to a landing page to provide their ACH or Credit Card authorization 3. Invoices are pushed into accounting software for approval  4. Once invoice is approved, the payment is automatically processed (money PULLED from customer's bank account or credit card charged) 5. Upon payment, the invoice is automatically closed out and AR aging is updated  6. The accounting software creates a transaction and automatically matches the bank transaction for reconciliation  7. Bookkeeper verifies accuracy of reconciliation Now that is a beautiful workflow with minimal manual steps. The result? -No more writing off bad debt  -No more delayed projects  -No more chasing customers for payment  -No more stressing out about not making payroll -No more not being able to take profit distributions  -No need to spend money on receivables admin or cash flow forecasting Curious to know what apps we recommend to use in this workflow? Check out the latest episode of Cash Flow Show - Getting Paid. (link in comments) Scotty Scarano 🥶❤️🔥 Accounting High Momentum Accounting, Inc.