5 B2B Accounts Receivable Management Best Practices | Behalf

By January 29, 2017Merchants
B2B accounts receivable management

5 B2B Accounts Receivable Management Best Practices

Your company’s accounts receivable management plays a crucial role in shaping your business customer experience. Accounts receivable management is responsible for making sure your company gets paid for its goods and services. They monitor accounts, keep track of outstanding receivables, collect payments, and guide customers through the payment process. Ideally they ensure that payments are received on a timely basis. A company with effective accounts receivable management is like a well-oiled machine. It can enhance communication with customers and get the company paid fast.

Inefficient accounts receivable management can unnecessarily tie up your company’s working capital. You need an effective way to deal with slow or non-paying customers, otherwise outstanding receivables will snowball out of control. Working capital is your company’s lifeblood; too many outstanding receivables can form a blockage that keeps working capital from circulating throughout the company. This article covers five accounts receivable best practices that could improve your company’s operational performance.

1) Incentivize

Ideally your customers pay for your company’s goods and services immediately. In reality, many competitive companies extend trade credit to give their customers extra time to fulfill payment for purchases. In order to move customers to pay fast, you must give them an incentive. One way to incentivize customers is to offer a discount to those who pay early. The discount does not need to be so large that it undermines the sale. A popular discount is 2/10/30, which means customers can get a 2% discount if the invoice is paid in full within 10 days of a 30-day notice. Another way to create incentive is penalize customers who pay late by charging interest.

2) Create a Sense of Urgency

Timing is everything. If your accounts receivable management department wants customers to pay on time, they need to give customers shorter payment terms and a clearer deadline. Customers have less room for error the closer the deadline is to the date of purchase. Accounts receivable may want to toss the trade credits and request that customers pay “upon receipt.” Trade credits are becoming out of date now that online payments have replaced checks and paper invoices. Trade credits accounted for mailing delays, but if your company accepts electronic payments it may be time to reconsider.

3) Keep it Simple

If you don’t do it already, it’s time to accept electronic payments within your accounts receivable management process. There are many payment services online that make it more convenient for customers to pay. If all it takes is the click of a button, customers are much more likely to pay on time. Online payment services also make it easier for the accounts receivable department to keep track of payment history.

4) Maintain Several Lines of Communication

Unresponsive customers are an accounts receivable nightmare. In order to keep the lines of communication open, offer more ways for customers to reach you. Implement a cross-channel approach to contacting both new and returning customers with information about their payment deadlines. Send receivables via Email, as well as related alerts on upcoming deadlines and special offers. Get a telephone number to call and follow up on unpaid receivables. Phone calls are harder for customers to ignore and also allow for more personal conversation.

5) Get Third Party Help

If your accounts receivable department is in the throes of an accounts receivable management nightmare, they can get help. There are factoring companies and collections agencies that offer accounts receivable management services. Factoring companies buy outstanding receivables from merchants and give them an advance. Factoring is fast and convenient, but it is a short term solution. Your accounts receivable department could also hire a collections agency to follow up with customers and get receivables paid fast. Both are effective accounts receivable services. There are other types of financing, however, that are much more affordable and less disruptive to your customer’s shopping experience.

More established companies integrate a financing program to support their ongoing customer payment needs. Behalf is a way to offer your customers a purchasing line of credit, giving them the extended payment terms they need while ensuring you get paid fast at a low processing rate. When you accept payment on your customer’s Behalf, they get up to $50k in funds and create their own payment plan with up to six months of extra time. They can use the funds to make larger, more frequent business purchases and regardless of the terms they choose, you always get paid in full within 1 business day. No paperwork. No recourse. No uncomfortable collections calls.

Learn more about how Behalf’s on demand payment tools are transforming the way businesses buy and sell here.