A clear, consistent collections process is essential to improving cash flow and reducing time spent chasing payments. Many businesses have recently experienced a slowdown in collections—making now the perfect time to reassess your strategy.

Below are several practical tips to strengthen your collections process:

Confirm Invoice Delivery

It may seem basic, but don’t assume the customer received your invoice. During the pandemic, many businesses found traditional mail unreliable and shifted to email invoicing. However, email has its own challenges. Consider confirming receipt of invoices, and follow up promptly if payment is not received within terms.

Bill Promptly and Regularly

Surprisingly, many business owners delay billing or bill irregularly. The best time to collect is immediately after providing a product or service—when it’s still fresh in the customer’s mind. Prompt and consistent billing improves collections and minimizes the risk of providing additional services to customers who may not pay.

Offer Multiple Payment Options

Offering flexible payment methods increases the likelihood of receiving payment. Options may include ACH, credit cards, PayPal, or digital wallets. Ensure your payment portal is easy to use—if it’s not, consider upgrading to a more user-friendly system.

Establish a Written Process and Assign Responsibility

Create a documented collections process and designate someone to manage it. Define each step clearly—what happens first, second, and third when payment isn’t received. One business we work with holds weekly meetings between the owner and controller to review accounts receivable—a best practice for keeping collections top of mind.

Monitor Weekly and Stay Consistent

Collections efforts should be steady and predictable. At a minimum, generate a weekly aged receivables report for key team members. Include notes on outreach attempts and customer responses. Visibility helps drive accountability.

Encourage Peer-to-Peer Contact

An effective tactic is to connect your team directly with your customers’ accounts payable staff. When possible, encourage relationship-building—local meetings over coffee or lunch can go a long way toward improving responsiveness – especially when there is an issue.

Know When to “Hold ’Em” and When to “Fold ’Em”

If you doubt a customer’s ability or willingness to pay, take action. Think of your business as a bank—would you extend this customer credit? If the answer is no, consider lowering their credit limit or changing payment terms. Requiring advance payment is one way to reduce risk.

Also, line up a collection attorney and have a defined timeline to pull the trigger. Receivables don’t age well.

Final Thought

As Peter Drucker said, “What gets measured gets managed.” Collections should not be a last-minute or inconsistent effort. A structured and proactive process is the best way to ensure consistent cash flow.

If you need assistance refining your collections strategy, contact your Dent Moses advisor. Our Outsourced Accounting Group can help you review and improve your internal processes.