Mistake #5 Letting your Accounts Receivables Become Past Due
The longer you neglect your AR the harder it is to collect your payment. It is important to be proactive in the collection of your AR to avoid your clients from becoming past due. Here are some items to think about when it comes to new clients and the prompt collection of your AR:
- Signed Contact – This is the number one “must have”! Be sure you do not start work without a signed contract. You will want your contract to include an estimated total for the overall task you will be completing, the amount you require as a retainer, the terms of your billing – how often you send invoices and how many days after issuing they have to submit payment, how much of a late fee will be charged should they become past due, and last but not least the leverage you are able to put to use when it comes to delinquent payees. Starting work without a signed contract can lead to your client refusing to pay you – even if you had a verbal agreement. Many clients will stress on how quickly they need something completed and will ask that you start immediately. With all the electronic ways we can do business now days, there is no reason work should be started without a contract. It is a part of the famous saying “CYA”.
- Requiring a Retainer – It is important to require a retainer prior to starting any work. As an expert witness it is acceptable to request 50% of the total estimate of your deliverable. This allows you to know that your client has skin in the game. With a 50% retainer this also allows your AR to reflect a lower total, as well as payments to be received in a timely manner.
- Having Unclear Payment Terms – Your contract as well as your invoices should reflect clear payment terms. If your contract and invoices do not have clear payment terms your client may not move quickly when it comes to processing your payment.
- Billing Once a Month vs Twice a Month – Once a month billing can lead to large invoices which in turn can take longer to be processed by the payee. By issuing invoices twice a month you can receive your payments much faster. When invoices become too large there is likely a process the invoice needs to go through in order to be approved for payment. Another words, the higher hands will need to receive, review and approve before your payment will be sent. This can lead to delays.
- Failing to have a Detailed/Itemized Invoice – The failure of a detailed invoice can lead to a delay in receiving payment. Your client wants to know what they are paying for and what work thus far has been completed. When your invoice lacks details, it is unlikely your client will send payment. This could lead to your client wanting to discuss the invoice with you and I guarantee this is not on their priority list due to the number of things they are busy with. A phone call to you for discussing the invoice can potentially be delayed for a long period of time.
- Sending Invoices to the Wrong Person or Department – This is IMPORTANT! At ARS we have seen this happen many, many times. In this business, at times it is assumed the invoices should be sent to the person/attorney that you are working with. More than likely the person/attorney that you are working with is NOT the person that cuts the check for your payment. At the start of your working relationship with a new client, or even a past client that you are starting a new project with, it is important to ask whose attention your invoices should be addressed and sent to. At ARS we have an AR management system, when exercising our system, we often run into the attorney receiving the invoice and it is becoming past due simply because it was never originally sent or forwarded to the correct department/person.
- Not Following Up on Unpaid Invoices – If your invoice has become past due and there isn’t anyone following up on the invoice, chances are, it is going to continue to be unpaid. At ARS, we follow up on the invoice as soon as it has been submitted to your client. We confirm receipt of the invoice, inquire about any questions, and finally, remind them of the due date. There are continued steps in our management system should your client then become past due.
- Multiple Payment Options – By providing your client with multiple ways of submitting payment, chances are, you will get paid faster. Here are some forms of payment you may accept or want to consider accepting: Cash, Check, Credit Card, ACH, Wire Transfer, or PayPal. While check is the most common way for receiving payment, you may be able to collect payment a bit faster by offering additional payment methods.
ARS can assist you in collecting your AR. We have an accounts management system that has extraordinary results – you will see and feel the cash in your pocket! Give us a call today to see how we will rescue your receivables!