A/R Optimizer » Improve Invoicing Procedure

Establishing Terms

Terms and Conditions

Identifying billing and payment terms should be preemptive – your main goal is to avoid delinquencies and assist in your customer’s collection. Find out what works best with a customer at the time of the sale, including payment installments, interest charged, etc. If it’s to the company’s advantage, it may also be ideal to grant discounts if paid promptly.

Shortening Timing of Invoices

Be wary of any program that allows a large lag-time or small installment payments, because they usually result in a lower recovery ratio. Sending invoices out faster may result in a faster response. I, personally, would recommend sending invoices out in less than 24 hours.

A few years ago, I had a client whose receivables were around 60 days old. In walking through their invoicing process, I found that invoicing had to go through several layers of approval before it was released. Often, there were no changes made. Even after eliminating some of these approvals, there weren’t enough errors to justify holding up the payment for another two weeks.

Billing Procedures

Following up is essential in billing procedures in case the customer requires you to take an alternative action. Always type, print, and copy the terms and procedures on statements, contracts, or invoices without loopholes. Remember that terms and agreements are set to benefit both parties.

Maintenance

When following through with an invoicing procedure, make sure you have accounted for everything on the company’s end.

You should always do the following:

1. Ensure that bills are correct.
2. Make sure everything that can be billed is billed,
3. Meet the internal approval process.
4. Note the payment terms on invoice.
5. Date the bills at the end of the period being billed.

Any discrepancy in the maintenance of the credit collection process may result in the company being at fault. In addition, the customer’s may accuse that you are the reason for the non-payment.

Follow-Up

To avoid any potential issues pertaining to the customer’s bills…

Call the client 10 days after bills have gone out to ensure that the client doesn’t run into any issues. 

The purpose of this is to make sure that the bill has reached the client and the client has acknowledged the request. The company will then have the opportunity to alter any mailing addresses sooner rather than later.

Call the client 29 days after billing to ensure it is set up for payment. 

This is more of a “second notice.” But it is important that you phrase your call effectively so client will not be offended.

At 45 days, notify a supervisor and have them call the client. 

The supervisor may be able to influence the severe need for payment.

If the bill ages greater than 60 days, then send the final notice. 

Now might be the time to call in third-party involvement if the payment is being disputed or the client refuses to pay.