Occasionally, at networking and other events, we hear small business owners grumble about not getting paid for jobs they’ve done. At The Payroll Department, we understand their frustration. Often, the problem really comes down to not having an accounts receivable process in place. Many entrepreneurs “leave money on the table” by not telling their clients what their terms of payment are, not following up for payment, and worst of all, not even sending an invoice.
Accounts receivable is any outstanding money or invoices owed to your company by clients and other people or companies. To be profitable and grow your small business, you need to have an accounts receivable process. However, managing your accounts receivable can be a big task that requires a lot of time. You need to send out invoices, stay on top of when payments are due, and keep track of which clients have paid you. If you find your accounts receivable process is taking time away from running your business, it’s time to talk with a bookkeeping service provider, like The Payroll Department. We can help you set up and manage your accounts receivable process.
Essential Elements of an Accounts Receivable Process
Some things you need to think about when developing your accounts receivable process include:
- New account application form. Have new clients fill out an account application form. Include a section on the form where new clients acknowledge they have read your payment terms and conditions. An account application form can help reduce the number of clients who can’t pay for your goods and services.
- Payment terms and conditions. What are your expectations for payment? Are your invoices due upon receipt, 30 days out, or 60 days out? How can your clients pay for your goods and services – cash, check, credit card, PayPal or another payment processing service? Will you charge interest on late payments? If so, what are your interest rates and terms for late payments?
- Invoice Even if you have accounting software like QuickBooks, you still need to create invoices asking for payment. However, QuickBooks does have a feature through which automatic invoices can be created for recurring payments. But you still must set it up. Additionally, you need to make sure your invoices got sent and were received. A bookkeeper, like Grace Walker at The Payroll Department, can manage your invoicing and keep track of payments.
- Accounts receivable reports. To stay on top of your accounts receivable, you should run monthly reports to determine which invoices have been paid, are still outstanding, and are past due.
- Follow up on outstanding debts. At some point, every small business owner has a client who doesn’t pay on time. Therefore, you need to determine what your process will be if this happens to you. When will you follow up on past-due accounts? How often will you call? Will you send out letters demanding payment? If you don’t have time to follow up on outstanding debts, Grace Walker with The Payroll Department can follow up for you. So, you can spend your time doing what you do best – running your business.
Don’t Let a Sloppy Accounts Receivable Process Be Your Business’s Downfall
Your business’s accounts receivable is essential to your cash flow. If you don’t get paid on time, it could cripple your small business. You won’t have the money to manage your operations, pay your employees and vendors, and ultimately grow your business.
If you need help with your accounts receivable, contact Teresa Ray at The Payroll Department. She and Grace Walker can meet with you to discuss your bookkeeping needs and how The Payroll Department’s bookkeeping service can help you. If you want your business to have a long and profitable future, you need to successfully manage your accounts receivable.
– Ariane of The Payroll Department Blog Team