Getting paid for a job well done after putting in all that hard work is one of the most rewarding moments of running a business – so long as you are actually paid. Because if customers don’t compensate you for that hard work, then the collective debt that is owed starts to pile up in the accounts receivable, where it’ll stay there to remind you of all those useless attempts at claiming your well-deserved payment until it is either finally settled or written off as a loss. It doesn’t have to be this way, though, because there are many clever ways with which the accounts receivable can be kept under control – especially when online accounting software is involved.
Why Is the Accounts Receivable So Important?
The term ‘accounts receivable’ may sound incomprehensible to those who are new to the world of accounting, but it’s actually only two aspects: first, a detailed list of all debts owed to the business and second, the process of collecting those debts that starts with the issuing of an invoice and ends once the costs owed are paid or written off. Simply put, the accounts receivable is basically a tool for monitoring clients. And since being profitable is the number one goal for any business, SMB owners should always strive to prevent this constantly changing list of debts from getting longer and longer – which can be achieved easily with the aid of the proper tools like an online accounting program.
Bulletproofing the Accounts Receivable Process
Invoice Right Away
The first step to keeping the accounts receivable under control – and to ensure being paid on time – is to send the invoice immediately after the job has been completed. Thankfully, online accounting programs can put together invoices in no time, which then can be sent to the appropriate client with a single. Recurring invoices are even more handy, since they are automatically delivered to customers at regular intervals.
Fast Payment Option
Although opting for this service isn’t obligatory – not to mention it’s never included within an online accounting software subscription – it’s highly recommended to make use of it. The reason is simple: invoices that can be paid quickly with credit or debit cards just by clicking on a specific button are more likely to be settled in time than invoices that require debtors to pay by wire transfer.
Setting up Payment Terms
Another effective way of creating a watertight accounts receivable system is by setting up payment terms that clearly detail from the get-go the amount of time that clients have to pay and what the consequences of an untimely payment will be. It’s best to remind customers as clearly as possible, which can be easily done by adding a shortened version of the payment terms as a footer to the invoice.
Applying Reminders and Late Fees
Clients can often forget to even pay the bill, and that only drags out the accounts receivable process. For this reason, the most advanced cloud accounting solutions are equipped with two handy features. The first of these is the payment reminders function, which are stern but polite messages that can be set up to be sent at predetermined intervals should the payment not arrive by the original due date. The other option is the application of late fees, where the software will automatically and gradually increase the original bill of the invoice until the debt – and added penalties – are finally paid.
For many years the only way to make sure the invoice was paid was to contact the debtor directly. While doing this type of follow-up is still useful – as it can help you to understand the reason behind the untimely payment, for instance – online accounting software makes the whole process much easier.
For starters, invoices are duly tracked from the moment of their creation until they are paid – so much so, in fact, that you are also told whether the invoice was opened by the client or not. Online accounting software can also display the business’s bank feed, meaning that new transactions will immediately appear on the program’s dashboard and can then be reconciled right away to remove the corresponding debt from the accounts receivable for good.
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