Any business owner will understand the struggles that come with managing accounts. Getting your finances in check is a vital part of running a business successfully, however, balancing various payments, bills and fees can be far trickier than it may seem. By far the most difficult task involved with managing accounts is ensuring that all buy-now-pay-later payments are made on time. If these accounts run past their scheduled payment date, they will become overdue receivables, please see more in a recent blog. Collecting these overdue payments quickly will help to keep your finances in check and prevent you from losing track of the payments that are owed to your business. To help you manage this tricky task, this article will guide you through how to collect overdue accounts receivable quickly and efficiently.
What are overdue accounts receivables?
Overdue accounts receivables are mainly dealt with by businesses who offer 'buy-now pay-later' schemes for their customers. With these initiatives, customers will purchase a product or service without paying the full amount so will be left with outstanding payments to your business. The amount due to be paid will differ depending on the exact scheme that you offer, with many companies offering 50% upfront costs followed by the further 50% being paid at a later date.
When these outstanding payments run past their scheduled payment date, they become overdue receivables. The exact payment date will differ between each company but most businesses offer a 30, 45 or 60 day time period to make the payment that is due. Accounts will be classed as overdue as soon as they pass their payment date.
Overdue receivables can quickly become frustrating if they go unpaid. As a business, you have the right to collect these overdue accounts as quickly as possible and can use legal action if necessary to ensure that the correct money is paid for the products or services that you provided. When purchasing through a buy-now-pay-later offer, customers consent to the terms of the payment so will be legally bound to fulfill it.
Why are overdue receivables a problem?
Overdue accounts receivable can cause significant disruption to the cash flow of your company, as shown in another recent blog. This can bring up a number of challenges surrounding your finances and available funds, which could massively affect business performance. In the worst-case scenario, you are essentially giving away stock for free! Many businesses will not realise the full extent of the problems that can be caused by overdue receivables until they are too deep into the problem.
Company time is wasted dealing with collecting the receivable
One of the biggest causes of frustration when dealing with overdue receivables is that employees must dedicate hours of their time to chasing up customers and collecting the overdue accounts. This is time that could be spent on other tasks, which can leave employees feeling annoyed with the process. All business owners will know that annoyed employees are bad for business.
Insufficient funds are available to your business
Overdue accounts receivable could affect the cash flow of your business by leaving you with insufficient funds available to run operations. If clients are not paying for the services or products that they have taken from your inventory, you will not be receiving enough money to buy new goods to keep your trade going.
A profitable business should be buying new stock with the revenue from what has already been sold. If these funds are not available due to overdue receivables, your business could end up taking out credit to make up for the shortage of cash. If this continues, you may end up maxing out your credit limit which will cause further stress and management problems.
The costs of paying bookkeepers to send out statements can be high
With insufficient funds available, the last thing that you want to be doing is paying bookkeepers extra wages to send out receivables statements and to revise any invoices that you may have. The extra work carried out by employees to collect the overdue accounts will cost your company extra money, which could put you even nearer to your credit max. Overdue receivables may also increase the costs of hiring a year-end financial auditor to analyse the collectibility of the accounts.
How to collect overdue accounts receivables
Collecting overdue accounts receivable can cost your business more time and money than you can afford. The process of sending out notices to customers can also lose their goodwill and decrease their likelihood of buying from you again. Simply put, collecting overdue accounts is a long process that can damage your business just as much as having those initial overdue receivables in the first place.
The best way to ensure that overdue accounts receivable can be collected simply, quickly and easily is to integrate credit control software such as Credit Hound into your business processes. Credit control software can take over your existing accounting system and manage everything from chasing overdue payments to paying your employee's wages. Essentially, installing crediting control software is a way of automating your accounts receivable management which will improve efficiency and help to streamline operations.
Credit control software will work to actively chase up accounts receivables, reducing the amount of stress that is placed onto your employees and encouraging clients to pay back sooner. The software can also quickly analyse invoices to ensure that the correct receivables are being paid which will reduce errors that can be made when doing the process manually.
How can Draycir help?
At Draycir, we specialise in creating software that will improve your business process in simple-to-use steps. Our Credit Hound system is the solution to all of your accounting troubles and can help to fully automate your finance processes.
Credit Hound will help your business to collect overdue accounts receivable by:
- Clearly displaying what is overdue and whether any invoices are being disputed
- Managing the tasks involved with accounts collection
- Keeping track of customers who have promised payments to your company
This makes keeping on top of your overdue receivables easier than ever before! To learn more about our Credit Hound system or to speak to our experts about what we can do for your business, get in touch with our team today!