Accounts receivable can represent a large portion of your agency’s assets. Without a standardized way to generate invoices and collect money, you wind up stretching existing resources to cover business expenses until all outstanding payments have been resolved. Avoid cash flow problems by following these best practices for every transaction.
Have a Clear Procedure
Everyone in your agency should follow the same process to input client information and generate invoices. Have one invoice template that includes all company contact information and the company logo in a prominent place, and use this template for all transactions. Develop and establish a unified system for numbering and recording invoices using unique codes for projects. Once an invoice has been created and sent to a client, make sure that it gets recorded in the system so that no duplicates are generated. With a cohesive system in place, it’s much easier to keep track of billing and prevent the problem of double payments.
Tighten Up Terms
The advent of email invoicing and electronic CRM tools means that billing and payments can be instantaneous. Billing terms no longer need to allow for the time it takes for a paper invoice to reach a client. Fast turnover is important for receivables in a creative agency, and you need to let clients know that you expect prompt payment. Include the date of issue and expected payment date clearly on each invoice. If your budget allows, you can offer an incentive to people who pay before the due date arrives. Clients are more likely to send in an early payment if they’re getting a small percentage off the total price.
Choose Integrative Systems
You’re already using software to handle time tracking, client data and project management. Having an invoice application that works with these systems simplifies billing by allowing you to pull up-to-date data from multiple places. Since you don’t have to contact each department separately to get the information you need to generate invoices, the process goes much faster, and you get your money sooner. Linking invoicing with time tracking ensures that every invoice is accurate and all clients are charged based on actual time spent rather than estimates from various team members.
Keep Track of Receivables
Knowing the “age” of your receivables shows you exactly how many assets you have tied up in unpaid invoices. The longer an account remains unpaid, the longer your agency has to operate without important revenue. Run regular reports on all receivables, noting how close any outstanding invoices are to their due dates. These reports also reveal any clients that may be notoriously late with payments. Make sure that the accounting department has copies of these reports so that they know which clients have paid and which need to be contacted with reminders. You can also consider working with a capital funding company to factor receivables in order to get invoice revenue right away.
Be Strict with Follow-ups
It never hurts to send a note to clients when the due date of an invoice is approaching. Sometimes an invoice has only gone unpaid because it was misfiled or got transferred to the wrong department. A quick, friendly reminder can prevent the need to hire a collection agency to handle delinquent payments. If a note doesn’t work, pick up the phone and make a call. Find out if the client is having a particular problem that’s keeping them from paying on time. Work with them to resolve the issue so that you get the money you need while maintaining a positive relationship with the client.
Keep Client Information Updated
You can’t follow up with anyone if you don’t have the right contact information on file. Make regular checks of your client list to ensure that names, addresses, email addresses and phone numbers are correct. Some companies may have a specific person or department that invoices must be sent to, but this is subject to change. If someone retires or departments are restructured, your invoice may get lost in the shuffle. Get in touch with clients at regular intervals to keep your records current.
In creative industries, quick payment on accounts receivable is essential. These best practices create a more streamlined invoicing and collection process to help your company avoid the problems associated with outstanding accounts.