Accounting & Finance

10 tips to expedite collection of all the money your business is due

  • 4 min Read
  • August 18, 2021

Author

Kanika Sinha
Kanika Sinha

Kanika is an enthusiastic content writer who craves to push the boundaries and explore uncharted territories. With her exceptional writing skills and in-depth knowledge of business-to-business dynamics, she creates compelling narratives that help businesses achieve tangible ROI. When not hunched over the keyboard, you can find her sweating it out in the gym, or indulging in a marathon of adorable movies with her young son.

Table of Contents

Tracking down payments from late customers seems to be a month-end ritual for almost every small business owner. Collecting from these customers can be awkward, not to mention time and energy intensive. Meanwhile, the effect of delayed payments on the business can be profound in terms of disrupted cash flow.


But why wait until an invoice is past due before taking any action? Instead, save yourself the trouble by being more proactive in your debt collection strategy. This will not only help you maintain positive cash flow, but it will also keep your business relationships strong.


We have put together 10 practices that entrepreneurs can implement to collect money they are owed faster.


1. Review your existing billing cycle



By simply changing your billing cycle, you can accelerate cash flow and get better at tracking late payers. If you have a monthly billing cycle, consider adopting a more frequent billing cycle, such as twice a month or even once weekly.


You can also invoice customers early in the month. Since most companies do a once-monthly check run, if your invoice happens to miss that monthly run, you will otherwise end up waiting for another month to get paid.


2. Create better invoices



Sending unclear or incomplete invoices can hurt your business and delay payment.  Pay close attention to your invoice design and ensure that they contain sufficient detail yet are simple and clear.


Your itemized invoice should contain the issue date, net terms, due date or “upon receipt” and instructions for paying offline, such as by check (including to whom it should be written and where it should be sent), as well as instructions for paying online.


And last but not least, make sure your invoices are sent promptly!


3. Discuss your terms with the buyer beforehand



It is best to establish your terms and present them to customers at the time of sale. This might seem a little inconvenient or even uncomfortable, but remember it is a step toward keeping your cash flow going.


4. Run a credit check on the customer



As they say, prevention is better than cure. It is a good practice to check the credit history and score of your potential customer and minimize the risk of delayed or unpaid invoices.


Talk to us about how our outsourced business services can help your business be proactive in invoicing and improve debt collection rates.



5. Offer early payment and prepayment discounts



To ensure getting paid on time and in full, consider offering discounts. For example, you could extend a discount of 2% to 5% for paying in advance. By incentivizing customers, you will get paid faster and save yourself the hassle of trying to collect payment later.


6. Set a penalty for late payment



Some companies secure prompter payments simply by mentioning a penalty for late payments on their invoice. Before you add this penalty clause to your invoice, make sure that you have a clear policy explaining that a fee will be levied on payments made after the due date.


Though you may not actually charge the fee and may even waive it for loyal customers who run behind on their payments for good reasons, simply having a late payment penalty rule will speed up collections.


7. Mandate deposits, down payments, progress payments



Consider asking customers to make an upfront payment, which is a standard practice in many industries. Request full or additional payments along the way as results are delivered.


8. Set up reminders



Don’t try to coordinate with customers after the due date. Instead, establish a follow-up schedule.


Outline a plan for periodic follow-ups through letters, emails or phone calls where you remind the customer to make payment within the specified time frame.


9. Take a personal approach to overdue payments



When payment is slow coming in, take a more personal approach toward following up with customers. This could provide you with valuable insight on the root cause of late payments – including issues with your customer service or even problems with your products.


10. Seek professional help



Sometimes using a professional service to help manage receivables is a good idea, especially if you are unable to accelerate your cash flow despite your best efforts. Otherwise, it is likely to become a serious collection problem that could cripple your business.


Keep in mind that you can opt for outsourcing account receivable services designed specifically for small- and mid-sized businesses, to manage your cash flow more effectively.  


Escalon provides startups and small to midsized businesses with accounting, strategic finance, CFO services, taxes and support. Talk to an expert today.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

Small Businesses

The ROI of Outsourcing Business Services: How to Measure Your Investment’s Impact 

The ROI of Outsourcing Business Services: How to Measure Your Investment’s Impact  In a world where every dollar must count,...

Read More
People Management & HR

2025 Employment Law Updates: What to Know

As we step into 2025, businesses across the country face several important updates in labor laws and employee benefits. Staying...

Read More
Startups

5 Signs Your Startup Needs an Outsourced CFO  

5 Signs Your Startup Needs an Outsourced CFO   Startups often operate with lean teams, but as they grow, financial complexity...

Read More
Leadership & Growth

CG Startups: How to Keep Costs Low While Scaling Operations 

Consumer Goods Startups: How to Keep Costs Low While Scaling Operations  Scaling a consumer goods startup requires a careful balancing...

Read More
Press Releases

Escalon Expands Its Reach: Full Stack Finance and Early Growth Join Forces with Industry Leader 

Escalon Expands Its Reach: Full Stack Finance and Early Growth Join Forces with Industry Leader  In a strategic move that...

Read More
Taxes

Delaware Annual Review: What Series A-C Startups Must Know to Stay Compliant 

Delaware Annual Review: What Series A-C Startups Must Know to Stay Compliant  For startups incorporated in Delaware, staying compliant is...

Read More
Taxes

Tax Planning for Startups: Preparing for Your First Tax Filing

Tax Planning for Startups: Preparing for Your First Tax Filing as a Growing Business  For many startups, the first major...

Read More
Taxes

Unlock Tax Savings with the R&D Tax Credit

As a startup, managing cash flow and minimizing expenses are critical to your business's survival and growth. One often-overlooked opportunity...

Read More
Accounting & Finance

1099 Compliance for Early Stage Startups

1099 Compliance for Early Stage Startups As your startup grows from seed funding to Series A, B, or C, you’ll...

Read More