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On October 21st, 2016 by Alexander Hubenthal

Financially Fit Fridays 06: How to Improve your A/R Processes

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My very first “job” after college was working for a large corporation in the Accounts Receivable department collecting payments from customers who were paying invoices sent by the company I worked for to the customer. Getting timely payment from customers is not a new problem but there are things you can do to reduce time and lots of frustration during the collection cycle. I have learned and applied these tips by both working for large companies and small start-ups.

  1. Improve your invoicing processes: This can be achieved in a number of ways; for example, if you use an accounting platform, you can create standard invoices, create brand recognition for your company and you can also send invoices directly to your customers through the accounting system. Want to know what my go to accounting system is? Click here
    1. Do your best to not back load your month with invoicing. This will create a lot of pressure to collect payment from customers towards the end of the month and leave a big question mark on your cash flow if your invoices are not collected on time
    2. Invoice as soon as you complete a job or when your services have been completed. Why? Depending on what method of accounting you’re using in your software (preferably the accrual method), you will be able to recognize revenue sooner. Also, customers are much more likely to pay when an invoice is received shortly after services are rendered than a week, 2 weeks, or even later (please don’t do this 😱).
  2. Offer payment discounts to your customers who pay within a certain time period.
    1. Standard payment terms depending on what industry you operate in range between 30-60 day net payment terms. What does this mean? If payment terms on an invoice are net 30 days, that means you will owe the balance due on the invoice within 30 days.
    2. Standard discounts on invoices will look like something similar to “2/10 net 30”. No that is not some wacky accounting formula or February 10th. 2/10 stands for a 2% discount applied if payment is received within 10 days of the date of the invoice. You can have 3/15 or whatever you see fit to incentivize your customers to pay sooner. If the customer doesn’t pay during the discount period, they are expected to pay net of the invoice balance within 30 days given the 2/10 net 30 example.
  3. Offer Subscriptions
    1. As the internet continues to become more mature, more and more businesses are turning to the subscription-based business model. This business model alone reduces 90% of the frustration of issuing invoices and collecting payment from customers. There are plenty of integrations such as Bill.com that will automate this process for you. You will only need to intervene if a customer hasn’t taken the action to update their credit card information. I listed this one last because if you are a services based business and not an online one, it might be difficult to implement this business model into your business. But it is a wonderful option for plenty of other businesses.

What do you do to incentivize your customers to pay quicker? Do you do something unique to your business that you can share? Let us know in the comments:

On October 7th, 2016 by Alexander Hubenthal

Financially Fit Fridays 04: The 3 Services You Need Right Now to Automate Your Business's Bookkeeping

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Over the past few weeks, we have covered a lot of accounting theory but this week I wanted to tell you about some services we use that make our lives extremely easy when it comes to managing our business's books.

1. Xero

Out of all the available cloud-based accounting providers, Xero is hands down the most user-friendly in terms of user interface and integrable apps as well as the amount that you can do with it. In the past, we have used other providers to meet our cloud-based accounting needs but Xero was the only one that exceeded our expectations and their price point is competitive with the rest of the market.  Another reason we love Xero is because Xero automatically integrates with literally hundreds of apps through the Xero Marketplace that makes your bookkeeping feel like a breeze. The following 2 services we use also integrate with Xero and sync instantly over the cloud.

2. HubDoc

Are you sick and tired of spending hours each week keying in data from your bills or having someone else on your staff do it? Yeah  us too! Imagine a service where you can email or fax all of your receipts and bills to one location and within a few short moments all of the important data is synced with your Xero account and it is ready to be reconciled. If this doesn't have you as a business owner foaming at the mouth yet, I don't know what will. Get on over there and check them out today!

3. Bill.com

If HubDoc didn't get your motor running, this surely will. Bill.com is a complete turn-key platform for Accounts Payable and Accounts Receivable management. This is an elegantly designed platform that provides complete audit trail information to track who did what and when in the system. Safeguards can be put in place for certain people to only have access to certain roles. For example, you as the business owner would probably want to be the only one writing the checks for bills that need to be paid. Accounts can be set up on a multitude of access levels and can be constantly changed as the needs of your business change.

 

Boom! How many hours did we save on your weekly bookkeeping tasks by taking 3 minutes to read up on some amazing services that are out there to make your life easier? Want more tips? Click Here to sign up for our mailing list to be the first to receive weekly updates and more!

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