This simple accounts receivable process collection cycle is what I successfully used in my small business. This cycle made sure that our customers always paid us on time, every time. After all, it’s very important to get invoices paid on time. Not much can happen without cash flowing into the business.
I know it’s a cliche, but in any company cash really is the life-blood. In a small business, getting invoices paid on time is often the difference between business success and failure.
I know how it feels not to get invoices paid on time. My business (and I) almost went broke before I devised this accounts receivable process to get our invoices paid on time.
Business got so much easier for me when invoices were paid on time. It:
- Reduced anger and frustration and so…
- Reduced my stress and so…
- I could focus on growing my business – not chasing overdue accounts
- Reduced the need to get an overdrafts or loans
- Gave me a much better chance of making bigger profits
Strong cash-flow = much less stress for any small business owner.
All you need is a simple accounts receivable collection cycle that works.
The best small business collections cycle should get invoice payments in on time AND enhance business relationships…
Here is one that’s proven. Think …
- Invoices paid by the due date AND
- Improved relationship building AND
- Repeat business AND
- New business referred to you AND
- Never having to chase overdue invoices again
That was such a relief for me and it can be for you.
With No Accounts Receivable Process For Collections, I Almost Went Broke…
When I started my small business most of the work I did was for one customer. (I later learned that’s NOT the right thing to do).
I was so busy doing the work that I wasn’t focused on collecting invoice payments. I had quite a few overdue invoices amounting to tens of thousands of dollars!
Suddenly my customer told me they had a serious cash-flow issue. Imagine the stress for a new business owner…especially since I didn’t have enough security to ask the bank for a loan.
Fortunately, it all worked out well but what a scary lesson that was. If they hadn’t been able to pay, my business would have folded in the first year.
After that, I VERY QUICKLY put together a weekly accounts receivable process for collections that anyone could follow.
For the next 15 years part-time admin staff followed this accounts receivable process to make sure all our invoices were paid on time.
From that day, our customers paid by the due date.
This is the accounts receivable process cycle I’m sharing with you here.
Follow this and you can wave goodbye to overdue invoices. Your invoices will be paid on time like mine were. This is how it works:
The Key? Great Customer Service
In any small business just like mine, collections of accounts receivable is generally just a part of someone’s job.
Generally that ‘someone’ hasn’t had collections training. That’s OK, this strategy works perfectly by using customer service skills.
It’s worth remembering here that taking the time to make sure your invoices are 100% perfect gives you a 50% better chance of being paid on time.
Remember: This Works. It’s Proven. If it worked for me it will work for you.
Collection of Accounts Receivable – Key Point:
Split the time you allocate to your ‘accounts receivable collection workflow cycle’ over at least two days. Schedule your customer service follow-ups on these days.
I’m using Tuesday and Thursday in my example of the weekly accounts receivable collection cycle. Preferably leave a day in-between the days you choose.
The Weekly Collections Cycle: 3 Main Points
- Make a ‘courtesy call’ on any invoice sent 7+ days ago. 7-10 days after the invoice is sent is a good time to make the ‘courtesy call’. A ‘courtesy call’ is a customer service call to confirm:
- Safe delivery of the goods or service AND
- To ask the customer to confirm that the invoice is correct.
- Always make notes of conversations and agreements. That way you’ll always be in control. Knowledge is power!
- When making a courtesy call, follow up any older invoices where you don’t yet know the payment status.
Here is an example just using 1 invoice: Blue Invoice No 123.
To illustrate just how easy it is to get your invoices paid using this accounts receivable process for collections, I’ve allocated Blue Invoice 123 an ‘incorrect calculation’ error.
We can follow the collection process of Blue Invoice 123 in more detail here:
To see how this works with multiple invoices, let’s add in a second invoice Red Invoice No. 456.
This invoice also has a query that needs to be resolved:
We can follow the collection process of Red Invoice No. 456 in more detail here:
How To Get Invoices Paid By The Due Date In 4 Simple Steps:
All you need to do is follow this accounts receivable collection checklist for each Tuesday and Thursday:
Collections Success Just Using Customer Service Skills
100% Proven Over 15 Years. It Worked For Me, It Will Work For You
This is the exact collections strategy I used in my small business. Using this collections strategy, customers paid by the due date.
Because our invoices were paid on time I never had to apply for a loan. The business was always self-funded.
This strategy helped us to help our customers. We provided outstanding service by resolving queries quickly and seamlessly which helped build our reputation as an outstanding service provider.
Being an outstanding service provider meant that our customers became ‘Raving Fans‘. They gave us repeat business and referred us to other organizations. That was a very cost-effective way to grow the business…and all the time we were just trying to get our invoices paid on time.
As you can see I have been very specific in my example of a proven accounts receivable process collection workflow cycle. You might like to adapt it to suit your business – but don’t change it too too much. This really works.
Worried You’ll Upset Your Customers? Don’t Be…
On the odd time that we were asked by a customer if we were chasing payment early we had a standard phrase:
“Oh no of course not. We’re just making sure that our invoice is correct and that you have everything you need. Payment isn’t due until …………”
We never lost a customer using this strategy.
Small Business Collections Strategy – Key Actions:
- Schedule the best days and times to make your courtesy calls each week.
- Print out your ‘days receivable outstanding’ or invoice aging report. Make sure it shows all the invoice details you’ll need.
- Call your biggest and best customers first. Practice on customers that you have the best relationships with first before tackling customers you don’t know so well.
- Set a few small goals and targets. SMART GOALS are a good way to set goals:
- Be Specific. Maybe choose a few specific customers – or specific amounts.
- Make it Measurable. Perhaps a list of customers to cross off your list or a specific amount to collect for this week.
- Be Action Oriented. What actions will you need to take before making your courtesy calls? Do you need to read through some files or ask a colleague some questions? Knowledge is Power!
- Be Realistic. Following a new strategy takes a bit of time. Be easy on yourself. Make yourself a few goals and targets you know you can reach. Something that might stretch you a bit but you’ll be really happy with the result.
- Give a Time frame. Give yourself a realistic deadline. COB today? This week? The end of next week? Month end?
And lastly, take the time to celebrate your success. Getting invoices paid on time and having strong cash-flow made running my business much less stressful. It could make yours less stressful too.
If you are a small business owner, let me know about your accounts receivable process successes and challenges. Leave me a comment or a question in the box below. I’ll be sure to get back to you.