Accounts receivable: Accounting firm in Edmonton says collections is a right not a privilege

What is accounts receivable?

Your accounts receivable is the money that is owed to your company for products or services, but has not yet been paid. These fees are usually due within 60 to 90 days from the invoice date.

Why timing matters

Your business requires positive cash flow in order to thrive. Billing and collections is integral to cash flow, and to the avoidance of unnecessary expenses related to fees and interest on lines of credit.

Warning signs that collections processing may be necessary:

• Late payments require remedial action sooner rather than later.
• Stop-payment placed on a cheque. It is important to discover the reason for a stop-payment action immediately, and to arrange an alternative form of payment.
• NSF, or non-sufficient fund cheques. You may be able to collect on such cheques if you visit the appropriate branch of the issuing bank. However, this is a clear indication of cash flow problems for your client.
• Lack of communication from the customer; unreturned phone calls.
• Computer "issues." Due to the sophistication of modern computer technology, this reason for non-payment is not valid past the first 48 hours that payment is due.
• Non-payment by owner. This can be a unique challenge when the owner is a third-party to which you do not have access.

Collections policies give you peace of mind

Unmanageable accounts receivable places undue stress on your business – and on you. It is advantageous to have clear collections policies in place, and to explain these to your customers up front, before doing business. Suggested tactics include:

• Do not wait beyond 25 days to take remedial action. This may allow time for the customer to place additional orders from you, which further complicates the payment process.
• In order to act quickly, you must have a consistent method of reviewing accounts in place.
• Discuss a specific date of payment with the late-paying customer. This will give you leverage to move toward collection if the payment is not made on the agreed-upon date.
• Be clear, specific, and consistent. Set a final date for payment before collections, ask for cheque numbers, invite overnight payments, and call often until you obtain the commitment to pay.
• Be prepared to take necessary action. If your efforts to collect a debt do not produce results, inform the customer that the collections process will be initiated; then do it.

Accounts receivable can be a complicated task. Get the assistance you need from TrueBooks.

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