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Out with Old, In with New Receivables Tips

Small businesses can refresh accounts receivables with four tips for how to help collect money faster and improve cash flow.

Out with the old, and in with the new is a common theme this time of year. Yard sales abound as folks get busy making room in the garage, perhaps for new purchases. Home improvement projects get underway inside and out after a long, harsh winter. Let’s not forget about personal improvement spurred by thoughts of a new bathing suit season fast approaching. Yes, out with the old. And, when it comes to your small business, there’s no better time spruce up your accounts receivables to help collect money owed to you faster.

“Cash flow is the lifeline of a small business. Periodic checks on current practices and new ideas may help to ensure that you are maximizing cash flow,” said Matt Steenson, head of PNC Business Banking.

Here are four ways to refresh your old accounts receivables practices:

  1. Offer a payment plan to your customers: Many companies have clients that they do business with in bits and spurts. They may do a lot of billable business with the client over short periods of time, then the client may go silent for a few weeks or even months until they need services again. In these instances, consider offering a payment plan. Spreading payments over 12 months, for example, can help generate more consistent cash flow for you and more consistent cash expenditures for your client. And, it’s a monthly reminder of your services rendered. Just make sure to consult an attorney and include language that allows you to periodically review the terms to ensure you are charging accurately for the goods or services you provide.
  2. person using a computer with invoices on the screen

  3. Give your company invoice a makeover: As any experienced business owner or CFO knows, a hiccup in the invoicing process can send your payment into limbo. If you’ve noted delayed receivables lately, it may be time to revisit your standard invoice to make sure it is clear, contains all the essential information clients need and is formatted in a way that is easy to process – especially with the new digital processes available today. In particular, be sure to clearly present exactly what goods and services your business provided and at what fee, so your customer’s accounts payable department doesn’t have to hunt down details that could delay your payment.
  4. Treat a delinquent customer as a valued customer: It’s the “get more flies with honey” strategy. Improve your cash flow by actively pursuing the sometimes unpleasant work of collecting on overdue receivables. Demonstrate compassion that allows the client to “save face.” Avoid being confrontational initially so you don’t give the client justification to withhold payment. Engaging a collection agency should be used rarely and only as a last resort.
  5. Forecast the future: Whether seeking a business loan or working on a budget for your business, the first two questions will be: how much capital do you need, and for what purpose? But this should not be a one-and-done task each year. Revisit these two questions every month. Be sure to include in your assessment the capital you may need for long-term asset purchases such as equipment, vehicles or technology. Compare what capital you need against how much cash you expect to come in from business operations, and how much cash may be raised by selling assets or raising capital.

“Whenever possible, opt to receive payment via electronic processing,” said Steenson. “Waiting on a paper check can delay cash into your business by three to 10 days.”


Learn more about business banking at PNC »


Deborah Guild
If you find that your customers need additional incentive to speed payments along, Matt Steenson suggests offering a discount for early or on-time payments. Many invoicing programs for small businesses include such discount options as part of your invoice.

Business Jargon Made Easy

It’s all about the money, whether it’s coming in (receivables) or going out (payables).

  • Accounts receivable - Outstanding invoices; the money a company is owed by its clients.
  • Accounts payable – Money that a company owes to others; payments a business owes.

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