According to the survey, it has been observed that day sales outstanding (DSO) is growing in the technology sector for the last 10 years. People in the software and technology sector know that their sales cycles are longer than usual. Thus, their contracts and payments take more than the usual period. All these things create a problem in the receivable collection process. According to the report published, the DSO in the technology sector has been steadily growing.
This report shows that the technology sector is lacking behind in the accounts receivable practices. People in the technology sector should look out for different ways to improve the receivable collection process. Fortunately, there are different ways and tools to boost up the accounts receivable collection process. One of the best ways to improve the accounts receivable collection process is by investing in the ar collection software.
Here, in this article, we are going to discuss various tips to improve the process of collecting receivables:
- Send Invoices immediately
- Never ignore ageing receivables
- Charge Late Fee For Delay In payment
- Ask For Advance
- Allow Recurring payments
- Determine Credit History
- Create New Credit Policies
1. Create New Credit Policies
It is recommended that business owners in the technology sector should send the invoices to their clients immediately. If they will delay sending the invoices, it will automatically lead to a delay in the accounts receivable collection process. You should mail the softcopy of your invoice along with the hard copy. In case, the hard copy of the invoice will take time to reach the customer; you can use the soft copy as a reference. The customers will pay at the right time, even if they receive the soft copy of the invoice at the right time. The collection software will let you send the invoices to your clients and customers automatically and quickly.
2. Never ignore ageing receivables
Aging receivable can create a big problem for your company. Therefore, you should never ignore aging receivable. The customers are also busy in their hectic schedule and they may forget to make the payment before the due date. You should send the reminder message to your customers a few days earlier than the due date. It will help your company to get paid at the right time. You should let your customers know that the due date is approaching soon. Sometimes, just one reminder message and email can help you to collect the receivable at a faster rate. If you will be able to maintain consistent contact with your clients, the probability of collecting the receivable will increase significantly. The accounts receivable solutions will help in reducing the volume of aging receivables.
3. Charge Late Fee For Delay In payment
You should start charging fees for making a late payment. People do not want to pay more than the billed amount. Thus, they will start making payments before the due date. Some customers do not pay even after imposing late payment fees. Thus, another way to encourage them to make payment before the deadline is to charge additional money for late fees. You should increase the late payment charges with the increase in delay. The accounts receivable management software will help the business owners in the technology sector to speed up the collection process.
4. Ask For Advance
Before you start working with any client, you should ask in advance. This advance deposit will give you a guarantee that you will get paid at the right time. You should charge 10% of the total charges as an advance deposit. This upfront money will encourage the client to make payment before the deadline. In addition to this, the advance deposit will give you some money in your hands to improve your business.
5. Allow Recurring payments
You should allow your clients recurring payments because it will let your customers enter the credit card details. They will enter the details and a specific amount will be automatically deducted from their account. You should provide an online payment portal to your clients where they can enter the credit card or debit card details. This online payment portal will make the payment collection process simple and faster.
6. Determine Credit History
You should determine the credit history of your new clients. If they have a good credit history, it will give you a surety that you will get the payments at the right time. You should do the credit check to make a wise decision. You should also check the payment history of repeat customers. Stop offering your services to those clients who always delay in making a payment or who never pay. Account receivables act as the biggest asset for the business and all business owners should look out for different ways to improve the collection process. The latest technology accounts receivable system can help you to access the credit history of clients.
7. Create New Credit Policies
You should set up a credit policy for your clients or customers. You should convey these policies in advance to your customers. Sometimes, customers do not pay even after sending reminders and taking follow up. Thus, the last option is taking them to the court.