When your customers owe you money, you should not have to move heaven as well as earth to gather it from them.
Outdated programs need upgrades to the recent versions to guarantee timely and full invoice settlements. Appropriate cash flow management is important and is poorly managed. Therefore, good practices are to be put in place.
What are Account Receivables?
Accounts Receivables is the outstanding or the pending invoices that your business possesses or the outstanding amounts that are owed from their clients. The mentioned concept refers to given accounts that any individual has a given right to receive since you have delivered their product or services. Mostly, these receivables present given lines of credit that are extended by businesses and due within relatively shorter time periods that range from a few days to even a year. Proper management of accounts receivables is essential for a healthy financial outlook, and seeking guidance from an accounting firm Hong Kong can provide valuable insights into optimizing this aspect of your business.
One of the common pieces of advice that have been uncovered in the recent periods is to think critically involving the actual wordings on the terms applied to the invoices. Being polite as well as asking for payments within 30 days appears to get customers paid quicker than words such as ‘the due on receipts’ or ‘due immediately.”
As such, the Credit Research Foundation (CRF) often conducts surveys by industries that detail the relevant statistical evidence or facts relating to domestic/internal accounts receivable performances.
General debt collection as well as recovery can sometimes be complicated as well as seem to be a costly task for most people or businesses. As such, they are often faced with varying challenges as they try to clear their books of delinquent debts as well as getting their cash flowing again, such as:
- Arriving at cordial, out-of-court solutions.
- Communicating and negotiating in the debtor’s language.
- Appreciating the legislations of the land(s) where the debtors are located.
- Handling debtors and debt collection intermediaries in several states, across numerous time zones, as well as multiple currencies
- Finding debt collection service providers that consolidate all global commercial debt collection activities into one sufficient and effective collection operations.
- Finding dependable and cost-effective legal counsels in the business’ debtor’s jurisdiction.
In other words, giving customers a little flex room creates a standard good-will as well as speed up payments. This is proof of an evidence of the complex psychology of money expressing itself in the account receivables process.
Businesses that know their consumers well, and understand what inspires their accounting – plus accountability – help them implement other strategies in the future to receive payments without being unfriendly.
Why is Invoicing Important to Your Business?
Invoices are commercial documents that are issued by businesses to their customers. The documents clearly represent the products quantities, as well as the agreed prices for the products and services the business have provided the customers.
Invoices show the customers their obligation to pay the business, following the payment terms. As such it is important to have invoices for the reasons that they give adequate data of the flow of operations in the organization.
Relevant evidence is to ensure the keeping of good books as well as records. However, the most important reason is to have control over the business and assessing the profitability in line with the cash-flow situations.
Therefore, this makes everyone aware of the potential challenges soon enough and make business decisions with all the available data at hand.
What Happens When Your Business fails to collect its Accounts Receivables?
If organizations fail to gather and collect their accounts receivables, they can opt to take and report their debtors to court over the unsettled debts, and even outsource the debt collection activities to a suitable third party bill collector.
In other most given cases, entities can also opt for selling their accounts receivables for a profit to the factoring entity that will then collect the debts. These factoring companies usually offer some cash up-front, thereby making them attractive options for businesses that require a boost to their operating capital.
Therefore, if you report invoice/account receivables as income and fail to receive payments, it is claimed as bad debts. The Internal Revenue Service (IRS) permits such an individual to subtract bad debts as income or revenue on their previous returns.
The Accounts Receivables Best Practices
It is advisable for your business not to make assumptions regarding consumers involving their purchases because it does not act as a guarantee to receive their payments.
On the other hand, slow paying customers may necessitate your company to draw down cash reserves, as well as increase the amounts of financing required to cover operations.
As the financial records get older, the probability of collecting the outstanding receivable accounts diminishes. Therefore, the more amounts or money that the company has tied up in their receivables, the lesser the money or cash is available for running their business operations. If you own a dental business, then you should also look into HR for dental offices in the UK to develop policies that are aligned with your business goals.
The awareness of the accounts receivable best practices become more important small companies engaging as well as startups which are heavily dependent on receivables.
As such the following methods can be employed in your business operations to oversee the smooth operation of accounts receivables:
1. Deliver invoices electronically –
Rather than having a company invoicing all their clients at, for instance, the end of every one week cycle, invoicing them at just the right period to get necessary approvals for immediate payment is adopted.
For example, if clients have to allow two weeks for approval before the payments are sanctioned at a Council and Board meetings, invoicing two weeks before the Council as well as the Board meeting every period they meet can be effective.
If the board meets twice a month, then the organization can invoice twice a month. This would require separate billing dates, as well as, perhaps, first accounting approximations, for potentially every existing client, but the cash-flow improvement can be substantial.
Besides, if a job is complete, the company can invoice it immediately, regardless of what their client invoice cycles might be. Whether through electronic networks, e-mails or fax, automatic deliveries are timelier. It is important not to miss the several days it takes invoices to travel over the mail to its endpoint.
2. Have EFT, Paypal & 2Checkout payment options in addition to Other Payment Options -
Increasing numbers of companies are currently considering paying their suppliers using Electronic Funds Transfer (EFT) as well as other online payment systems that are available to them.
By stating on their invoices that EFTs may make payments, organizations will enable their consumers to deposit their payment directly to the company’s bank account.
This is possible by only including on the company’s invoice their EFT banking information or Paypal or Other information. This can assist a company to achieve their objective of ensuring cash flows.
3. Review the Accounts Receivables Regularly is the best of all practices -
It is important for businesses to track the aging of their accounts receivables, as well as systematically follow-up on every account that has past due more than the pre-determined number of days.
As a good practice the individual responsible can run aged receivable reports from their accounting systems on a weekly basis, in addition to paying special courtesy to any account receivables that are over, for instance, 15 or even 30 days old.
4. Before the invoice is sent, call or contact those whom must agree to the invoice before the customer will pay it -
This leading call is an intelligence collecting mission as well as a quality control phase. Persons in charge should verify that the contract is faring well enough for approval in addition to discussions of any existing problems. It is important to confirm that the individual will be presented to support the invoice, as well as find out who will recommend in the person’s absence.
This is probably the most politically suitable period to call or make contact. One will receive some good things or news, like: “We have changed our process.” Therefore, it is vital to make sure that you or the company sends a copy to Accounts Person as well as the purchasing departments or even the receiving department in addition to flushing out any intentions immediately, rather than allowing any problems to arise at the 30 or 60 days past due dates.
The company will usually be glad that they or even you made this phone call and visited.
5. Streamline Accounts Receivables: The Invoicing Software -
The best invoices or statements embrace every relevant piece of information, including the hours billed if it involves a service and all the specifications of the product if it includes a sales business.
Being transparent with customers avoids the necessity for follow-up queries on items that might be confusing to any person who receives them, as well as that, can delay payments. Invoices ought to be a clean, straightforward documents that contain the company’s logo.
If the organization is sending out – either digitally or even on paper – more than handful invoices a week, the company should be using accounting programs such as QuickBooks. Or, if they like the style of other online money-management programs or free HTML invoice templates, they might work well with online systems such as Invoicebus, FreshBooks or Outright.
The only concept to recall when a person involved automates: Before you embrace new software as well as billing processes, it is imperative to make sure the company’s clients are informed ahead of time of any existing modifications that will affect them and how they receive and pay their bill.
So what’s next?
Now that you have a solid understanding of the invoicing process and its importance, here is something to help you out –
A free html invoice template with auto-calculations that gets your work done in no time. Not only it has a super-elegant appearance, but it is a cakewalk to work with.
You can get rid of those word invoice files (or the boring excel invoice template) and switch to this easy html invoice template at no cost (Yes, it is completely FREE to use).
A general thought about the Free HTML Invoice Template
This free HTML invoice template has been designed to help out most companies. With its attractive layout, it comprises of such features:
- Plenty of white spaces
- Well proportioned columns
- Amazing typography
Just imagining how it feels if you do not have to concern yourself anymore about: calculation mistakes, the manual setups of dates and the agreeable terms in addition to the broken layouts. This HTML invoice template embraces several features making your work easier.
Features of these HTML invoice templates include:
- Ready to fill out as well as print immediately
- Supports various languages and currencies
- Supports several taxes
- Auto calculations of the subtotals, totals, taxes, in addition to discounts
- Easily customizable with an organization’s logo and colors
- Configurable columns, the date formats, and symbol positions (left/right)
- Customizable rows with easy drag and drop actions
- Created with HTML5, CSS3, and JS applications (so say goodbye to Word & Excel programs)
- Operates directly in any web browser on local computers (PC, Mac, Linux)
- No setup is required. Just click and you are ready to go
- Lifetime support as well as updates
So grab it right now when it is still free for you. In addition to that, if you want to take your invoicing story to the next level, here is a compilation of some attractive html invoice templates.