Cash flow is a necessity but is sometimes hindered by an inefficient collections and accounts receivable (A/R) process. An effective strategy surrounding A/R is crucial to your company’s success. It affects all levels of the organization, including marketing, sales, customer service, and operations.
Tax season is the best time of year to collect on slow or non-paying customers’ payments. Now is the time to get the slow-paying accounts into collections to ensure a front-of-the-line spot for when they get a tax return. Additionally, don’t wait until it’s time to do your taxes to go through your customer accounts and run the numbers. Ensure you monitor them year-round and establish practices to receive payment on time. Below are nine accounts receivable strategies for success this tax season.
The professionals at Kinum, Inc. understand how important it is for businesses to keep the cash flow in motion and receive payment when it’s due. If you are struggling to collect money that is owed to you, contact us today. We have offices in Indianapolis, IN, Virginia Beach, VA, and Cleveland, OH, but we serve businesses across the country.
Strategies for A/R Success During Tax Season
Plan Your Timing of When to Send Accounts to Collections
When your slow or non-paying customer receives their tax returns, you need to be at the front of the line of past-due accounts reaching out to them for payment. Many consumers will pay off debts when they receive their tax returns, and you need to make it a priority to be the first creditor on their mind that they decide to pay off.
In some cases, the creditor may be able to collect outstanding balances once the tax refund is deposited into an account, but the account must be in collections first. Therefore, the sooner you can send outstanding accounts to a debt collection company such as Kinum, Inc., the better.
Offer One-Time Settlements on Outstanding Debts
For consumers who may not be able to pay their debt off in full, you may be able to offer them the option to pay a substantial lump sum of the total due and forgive the rest. This generally ranges from 10%-50% of the total owed, depending on what you would like to accept. This will help you to recover the majority of the debt owed to you rather than the possibility of never receiving any payment and leaving the account in collections indefinitely.
The best time of year to offer one-time settlements is during tax season when the consumer has received their tax refund. Be prepared to send your customer the settlement offer during this time of year so you may catch them before they pay off other debts or spend their refund elsewhere.
Know When to Call Consumers
Debt collectors are trained to know how to successfully recover outstanding debts, especially during tax season. For the best chance of receiving payment from slow or non-paying customers, send the accounts to a collection agency that knows when to call consumers and what to say to achieve payment. The beginning of the year can be stressful for receptionists, and front desk employees; adding on debt collection duties only makes it more difficult. Pass off your non-paying accounts to Kinum, Inc. when your customers are receiving their tax refunds, and allow us to attempt to collect the past due payments on your office’s behalf.
Additional Strategies for A/R Success
Keep Customer Accounts Accurate
Create a habit of running audits on customer accounts annually. A change in address or email can result in an invoice being sent to the wrong location and late payment. With accurate information, you can better manage your customers and their billing.
Regularly Review Your Credit Approval Process
Never extend credit just to boost sales. Ensure you are following a clear credit approval process that cannot be abused. Your process should include when and how to override credit limits, when to place accounts on hold, and information on how the application process works.
Establish an Effective Billing Process
Invoices must be sent consistently and have a consistent appearance. They also cannot include any errors in pricing, spelling, etc. You may set up a customer portal to have the customers fill out some of their own information and pay their bills online.
Ensure Payments Are Applied Correctly
Payments should be applied immediately and correctly. It’s important to always know which accounts are current and which are past due. One way to help manage payments is to offer a limited number of payment options so you can keep track of them all.
Have a Payment Collection Process
When your accounts receivable is properly optimized, it’s easier to collect payments on time. It’s essential that your collection efforts are consistent for your team and your clients know what to expect.
Pay Attention to Trends
Track everything that comes in and out of your accounts receivable division. Make sure you know what accounts have outstanding balances, how long they have been in that state, and if the client has a tendency to not pay on time.
Ensure Customers Understand the Contracts
Let your customers know ahead of time what your expectations are so they can be prepared. Provide an estimate of expenses if possible and go over all the details so they can be involved and understand their role in the process.
Try a New Payment Strategy
If your clients have trouble paying, consider offering a new payment strategy, such as paying in installments rather than upfront. Find a strategy that works for your business and client base.
Invest in A/R Automation Software
Reduce the risk of errors and establish consistency with A/R automation software. This way, you can automatically generate invoices, send out late payment requests, and monitor clients’ accounts from one platform.
When Clients Still Owe Payments…
If all else fails and the client refuses to pay their bill for whatever reason, it’s time to reach out to the professionals. At Kinum, Inc., we collect payments for our clients every day. It requires trained debt collection agents and strategies to receive payment. We have a highly successful collection rate and will go to work for you. Contact us today!