Every accounting firm is looking for ways to improve the accounts receivable process as it affects all aspects of the business, such as marketing and purchasing. If you are an accounting professional who is looking to increase cash flow and save time and expenses each week, look at these ideas on how to minimize accounts receivable. Don’t let the accrual of pending accounts receivable derail all the hard work you've put into your clients' cases. When your accounts receivable are optimized, you’ll spend more time on developing your business, delivering outstanding service to your clients, and outshining the competition.
Every professional deserves to be paid for all the work they do, and for accounting professionals, it is worth investing time and resources to improve your process. There are several things you can employ to reduce your number of outstanding accounts receivable and give you the cash on hand that you need to invest back into your firm.
Here are some tips for minimizing accounts receivable and increasing cash flow at your accounting firm.
Implement upfront fees
Many accounting firms charge their clients upfront fees. In past decades, hourly billing was the standard for many accounting services, but many firms today find that flat-fee or value-based billing often works better for both the business and the client.
Some firms charge an upfront fee for an initial consultation to evaluate a case, while others provide a free consultation and then charge an upfront payment before going any further. When you are honest and transparent with your clients about what fees are due when, you are establishing a relationship of trust. Trustworthy behavior on your part about pricing and payment policies leads to loyal clients, more referrals, and improving your accounts receivable.
As you set your upfront fees, however, it’s important to remember some clients will be wary of giving you money before any services are done. You can overcome a lot of hesitation by maintaining transparency, communicating about all fees, and never allowing your clients to be surprised by a bill.
For more information on setting fees, check out How to Price Your Accounting Services.
Structure payment plans
After you receive an upfront fee, connect with your clients to set up a payment plan for the remaining balance. Once your client signs a payment plan, you can work with them to sign up for a credit card authorization or an ACH form. This results in dependable payments in a timely manner and assures you get paid the full amount you are owed. No matter what kind of payment plan you set up, the steps you take toward optimizing your accounts receivable will pay off in the long run.
For any bill payment method you establish, always make sure it is convenient and as automated as possible. Don’t overlook multiple communication styles, as well. For example, go paperless and send electronic invoices via email and other online payment options. Quality communication in a range of different mediums will help remind clients that their payment is due.
Consider using all-in-one accounting practice management software like Canopy, which allows clients to pay through their own portal, which is convenient for both you and them. Another important thing to do is to schedule regular follow-up communication so clients know where they stand, what they owe and how to pay it. Canopy will also automatically send requests for payment as frequently as you choose.
Stick to payment deadlines
While it can be difficult, you must stick to payment deadlines when they come up with every client. Whether it means failing to collect upfront fees, letting past-due accounts go, or generating inaccurate invoices, getting your internal accounts receivable process in order translates to smoother operations when interacting with your clients on what they owe you.
Failing to stick to payment deadlines can lead to missteps that can have serious effects on your tax resolution firm. Allowing clients to get away with not paying their bills on time doesn’t do them any favors as well. One thing you can do to help clients pay on time is to set earlier deadlines for problem clients. If you have a client who is notorious for taking advantage of your flexibility, give them an earlier deadline for payment. Shorten the client's payment window. Choose a deadline that works best for you and your cash flow.
When clients are late paying their bill to you, it may mean that you must put electronic billing aside for a moment and make personal phone calls to them. No matter how sophisticated your online billing options are, sometimes there's no substitute for a good, old fashioned phone call. If a client has repeatedly not responded to your emails or invoices, call them. Find out what's going on and what you can do to work with them to get your payment.
Unfortunately, there will be times where you must consider ending the relationship if all else fails, and sometimes you also have no other choice but to pursue legal remedies for nonpayment. Don’t hesitate to cut loose those clients who continually give you the runaround when it comes time to collect. If a client is consistently not paying you, consider whether it's worth it to continue working with them or not.
Start soon to reap the benefits
If optimizing your accounting firm’s accounts receivable processes seems overwhelming to you, remember that you don’t have to overhaul everything at once or make drastic changes right away. However, the sooner you begin implementing positive changes to the situation, you’ll quickly notice improvements to your cash flow. Whether your style is making rapid changes or taking a more methodical approach, there’s no better time to start optimizing your accounts receivable process.
Once you decide to act on overhauling your accounts receivable, don’t make things harder than they need to be by starting over from scratch. Canopy is ready to help you optimize the way you do business, especially when it comes to getting payment from your clients. Sign up for a demo here.