Billing & Accounts Receivable
The ability to accelerate cash receipts from customers is vital to optimizing working capital and requires an efficient process from product or engagement setup to collection follow up. Minimizing days sales in receivables and reducing interest on short term borrowing should always be one of your company's key performance indicators.
Invoicing
The timing and accuracy of rendering an invoice to your customer is a key component to accelerating cash receipts. Most delays in accounts receivable can be attributed to clerical omissions and mistakes that occur at the time of invoicing and can be easily avoided by following a few basic steps:
1) Understand your customer's payment cycle - Knowing whether your customer has a 30, 60 or even 90 day payment policy will enable you to time the submission of your bill so that remittance will occur during cycle. This has become particularly critical during the recent economic downturn as companies have been forced to lengthen their payment cycles.
2) Follow preset billing schedule on the contract or engagement letter - This will enable you to send progress bills at regular intervals requiring less time and effort. It is also more efficient for your customer since it is likely that they will have factored your invoice in their monthly expense budgeting.
3) Send invoice to the proper address and customer contact - This is the most common error and chief reason for lagging receivables, particularly if your customer has a large organization. Your invoice could sit on someone's desk for weeks before any action is taken and it is likely that you will need to resubmit your bill.
4) Obtain purchase order number from your customer and include it on your invoice - This is a very basic step to take to ensure that your bill is entered properly in your customer's payables' system.
5) Provide accurate service description and amount on your bill - Going back to step 2, pre-set billing will alleviate many of these concerns. There will be occasions however where you will need to supply greater detail that can be supported.
6) Include remittance information on your invoice - This will depend on the method of payment. For electronic transfer of funds, you will want to provide bank wiring instructions with the correct account and routing numbers. For checks, you'll need to provide the right address for your customer to submit to. If you are using a bank lock box, you will need to provide the bank address and your account number.
1) Understand your customer's payment cycle - Knowing whether your customer has a 30, 60 or even 90 day payment policy will enable you to time the submission of your bill so that remittance will occur during cycle. This has become particularly critical during the recent economic downturn as companies have been forced to lengthen their payment cycles.
2) Follow preset billing schedule on the contract or engagement letter - This will enable you to send progress bills at regular intervals requiring less time and effort. It is also more efficient for your customer since it is likely that they will have factored your invoice in their monthly expense budgeting.
3) Send invoice to the proper address and customer contact - This is the most common error and chief reason for lagging receivables, particularly if your customer has a large organization. Your invoice could sit on someone's desk for weeks before any action is taken and it is likely that you will need to resubmit your bill.
4) Obtain purchase order number from your customer and include it on your invoice - This is a very basic step to take to ensure that your bill is entered properly in your customer's payables' system.
5) Provide accurate service description and amount on your bill - Going back to step 2, pre-set billing will alleviate many of these concerns. There will be occasions however where you will need to supply greater detail that can be supported.
6) Include remittance information on your invoice - This will depend on the method of payment. For electronic transfer of funds, you will want to provide bank wiring instructions with the correct account and routing numbers. For checks, you'll need to provide the right address for your customer to submit to. If you are using a bank lock box, you will need to provide the bank address and your account number.
No comments:
Post a Comment