Collecting Accounts Receivable is an important part of every business. Here we use a recent textbook accounts receivable “what not to do” as an educational example. In the previous installment we met Bob Businessowner and heard the unfortunate tale of his year and a half old invoice. We learned that Bob inadvertently added 60 days onto his payment timeline due to his invoicing schedule being slightly askew of his customer’s invoicing schedule. In the second installment of this four part series we will use Bob’s missteps to demonstrate another easy habit that we can adopt to improve our accounts receivable collection timeline.
Invoice Receipt – We saw how being aware of his customer’s schedule could have gotten Bob’s cash in the bank 2 months sooner. But that only works IF Bob’s customer actually received the invoice. You see, Bob just chucked the invoice into the mail, same as he always does; however, Bob was not aware that his customer was in the process of moving to a new location. Somewhere in the mail forwarding/address changing vortex, Bob’s invoice became victim to a blackhole, disappearing off the face of the earth never to be seen again or possibly turning up torn and faded 47 years later in Topeka. The point is Bob’s customer did not get the invoice. Bob could have emailed the invoice to his customer on the morning of August 13th, and would likely have received a thank you reply from his customer. Then Bob could rest easy knowing that his invoice was getting the attention it deserves. Even if Bob isn’t into the new fangled email, he still could have picked up the phone mid-September to make sure that his invoice had arrived in his customer’s office. This approach would have also given Bob the additional benefits of keeping him fresh in the customer’s mind and providing an opportunity to chat up the customer, build the relationship, and keep an ear to the ground for new projects in the pipeline. Bob missed all of this business development gold AND to add insult to injury, he has no clue that his invoice is AWOL.
What will become of Bob and his year and a half old invoice? Tune in to the next installment in this four part series for another easy habit you can adopt to improve AR turnaround time. Until then, what can you do to avoid the trap Bob fell into? Could you or someone in your office spare the few minutes that it would take to touch base with your customers to confirm they got your invoice? Could any of your customer relationships be improved by opening the lines of communication?