Accounts receivable is an essential part of any business. This financial asset lets you sell your product or service and then receive payment for it in the future. But wait; there’s more, because a key performance indicator is how long that future might be. An outstanding receivable balance, which is the money customers owe your company, can make you anxious about whether they are going to pay you back at all. An aging report will help you understand how much time you have to collect from your customers and offer them discounts if they pay within a certain time frame. Read on to learn more about improving your accounts receivable aging report.
Know the reasons why customers don’t pay on time
First and foremost, it may be a simple matter of a customer either forgetting they owe you or not recognizing they owe you anything. This can occur with new customers who have not yet been exposed to your invoice process or with customers who you have contacted but who have not responded. Other times, unexpected expenses, insufficient cash flow, or bad financial habits may cause customers to fall behind on their payments.
Be proactive and set a reminder to follow up with delinquent customers
Delinquent customers are making your accounts receivable aging report look bad. The best way to get them caught up and off your books is to set up reminders to call them. If you set reminders for when they are 30, 45, and 60 days behind on payments, you can hit them at the critical time that their payment is due.
Examine the aging of receivables by product or service
As you review the aging of your receivables, you may find that some products or services have a much longer wait time than others. If so, you may want to consider raising the price on those products or services, or you may want to find ways to lower the wait time for the customers.
Review your payment times by customer
You may find that the majority of your customers are paying the same way, within the same amount of time. However, there can be some individuals who are taking a long time to pay you. If there is a consistent pattern, you may want to follow up with them directly. On the other hand, you may want to keep a record of all customers who have paid late.
Know what’s normal for your business
If you have been in business for a while and have a good customer base, you may be able to see what the norm is for your customers. If enough times go by and you see that a certain percentage of customers are taking a long time to pay you, you may want to follow up with them. This can be done over the phone or through email.
Disrupt your customer experience with artificial intelligence
Artificial intelligence can help you identify the customers who are behind on payments and then proactively reach out to them. This technology can help you save time and resources while improving the customer experience. This can be done through email, text, and phone calls.
Install a real-time payment tracking system
Depending on the size of your business, you may want to install a real-time payment tracking system. This system will allow you to know when each customer has paid and when their account has been completely settled. The system will also keep track of payment methods and let you know if there are any issues with the payment.
Send reminder emails and follow up by phone
If you think a customer may be having difficulty making a payment, you may want to send an email reminder to them. There are services that can generate an email that is personalized for your business. You may want to follow up the email with a phone call, perhaps on a weekend or outside of normal business hours when you think the individual may not be at work.
Conduct an aging receivable audit
If you have a high level of receivables, you may want to conduct an aging receivable audit. To do this, you simply create a list of all the customers who owe you money along with the amount they owe. You can sort it by the date the payment was due and the date it was received. This will allow you to see which customers are behind on payments and if there is a consistent reason why.
Accounts receivable can be a valuable asset, but only if it is getting paid. If you have customers who are paying you late or not at all, you can use the above tips to improve your accounts receivable aging report.
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