5 Quick Ways to Reduce Outstanding Accounts Receivable

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5 Quick Ways to Reduce Outstanding Accounts Receivable

My name is Adam Stewart, debt collection expert and owner of Debt Recoveries Australia Pty Ltd. Apart from being involved in the debt collection end of accounts receivable, a lot of my clients ask me what they can do to reduce their over 30 day accounts or prevent them from happening in the first place. I get asked the same questions over and over, so I thought perhaps the best thing to do is to give some of the free information that I give to clients when they ask me.

So here are my top five tips for reducing your outstanding accounts receivable:

 Put your terms clearly on your invoice. I find a lot of clients have long-winded agreements with many terms and conditions which the customers rarely read anyway. I always recommend that clients put their terms clearly, in bold, on the front page of the invoice. If you want payment in 7 days, ask for payment in 7 days. Ask for interest if it’s not paid within your terms. You can also ask for payment of any recovery fees, including legal fees, if the account is not paid. Put all this on the front page of your invoice. Preventative measures such as these will, in some cases, eliminate accounts receivable altogether. Email me at adam.stewart@debtrecoveries.com.au or skype me “debtrecoveries” and I will send you the proper wording to put into your terms and conditions and your invoice for this.

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    Call Debt Recoveries Australia on 1300 799 511 or email us at email@debtrecoveries.com.au

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    Have a standardised system for follow up. Again, I see a lot of clients with no system in place at all for managing their accounts receivable. Have a system in place and make it standard for the whole company. I suggest emailing your invoice 7 days before it’s due, then again the day it’s due, with a follow up email 3 days before payment is due. This may seem like over-kill, but it sends a strong message to your client that you are serious about payment and, if you have followed Tip No 1, you are also serious about getting paid. If your customer does not pay, have a system in place to follow them up. If you are going to send an arrears letter, send it the day the invoice becomes due, then have a follow up plan after that. Make sure everyone in your company knows what this system is and make sure they stick to it. Again, contact me and I will give you some free letter templates for following up arrears.

    Be Proactive. OK, so you say you have a system in place? My question to you. Is it being actioned? Does everyone know what the system is and is everyone following it? My suggestion is always to pick up the phone. Have one person in your team dedicated to nothing else but collections. Have them ring your customer the day the invoice falls due. Nothing beats a phone call for quick payment.

     Automate and document. Have a great software system that can automate and document the entire accounts receivable process. It doesn’t matter what the software is, so long as it can automate the entire process and it can easily document your invoices, emails, letters and notes on each customer. Have an automated email system set up to automatically send reminders to your customers for un-paid accounts. Have your dedicated collections person make comprehensive notes on each contact with your customer and make sure these notes are accessible on your software system, for the whole credit management team and also the sales team.

    Escalate troubled accounts. This is where I come in. If you have done all of the above and have still not been paid, don’t sit on the debts, hoping they will miraculously get paid, give them to a debt collection expert as soon as they fall outside your terms or as soon as your internal accounts receivable system has failed to collect. Don’t be afraid of upsetting your clients, in the long run, they will respect you for your sound accounting practices and they will also spread the word to other clients that you are serious about payment and not to be messed with. Contact me for more free advice, adam.stewart@debtrecoveries.com.au or skype me at “debtrecoveries” or call us on 1300 799 511

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    Email: email@debtrecoveries.com.au

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    Adam Stewart - Debt Collection Expert
    About the Author

    In 2002, Adam Stewart established Debt Recoveries Australia Pty Ltd, a debt collection agency specialising in the insurance claims industry.

    Adam has worked in the fields of motor vehicle insurance and debt recovery for over 12 years, working with some of the largest insurance and debt recovery companies in Australia. Read more

    3 Comments on “5 Quick Ways to Reduce Outstanding Accounts Receivable

    1. In addition to your written home inventory, you should have
      other forms of proof. The factoring company holds the
      invoice until maturation and settles the transaction with
      your company once the customer pays the invoice 100 %.

      The primary difference between recourse factoring and non-recourse factoring is the
      party who is at risk if your customer does not pay the invoice.

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