Common Accounts Receivable Mistakes to Avoid
Errors can happen from time to time, but many of these can be avoided by being aware of common mistakes and correcting them early on. Not only will this save your company time, money, and headaches in the long run, but a proactive approach to your accounts receivable process can streamline operations and improve customer satisfaction.
Take a close look at these six common mistakes to see how you can take actionable steps towards improvement.
Mistake #1
One Size Fits All Credit Policies
To speed credit approvals and customer onboarding, vendors may decide to extend standard, minimum credit limits and terms to all new customers, and determine extensions or restrictions after learning their payment behavior.
However, there is a danger for setting the same credit terms and limits for each customer. A blanket credit policy creates a sales obstacle for customers with strong credit and a need to buy above a restricted limit. The opposite is also true, extending credit to a customer without the ability to pay even the minimum limit will increase risk. These examples illustrate vendors’ risks near-term cash flow, future revenue, customer relationships, and reputation by following a one-size-fits-all credit policy.
The solution to establishing a comprehensive credit policy is understanding the customer’s credit history and payment behavior then delineating the appropriate credit limits and term. Identifying when to extend credit to a customer, how much, and for how long, forms a connection between you and the customer that results in on-time payments and a strong, long-term relationship.
Mistake #2
PCI Non-Compliance
What is PCI compliance?
Why should businesses be concerned?
What are the benefits?
PCI compliance is mandated by credit card companies to help ensure the security of credit card transactions. It ensures that you are taking proper precautions to keep credit card and payment data secure. Being PCI compliant protects vendors and customers by reducing the risk of credit card data theft and loss. It also prevents data breaches and guards against identity fraud. PCI compliance is a core component for companies who accept credit card payments. The PCI Standards Council has a set of security guidelines that safeguards data and protects cardholder’s information.
Becoming PCI compliant is not difficult, but maintaining compliance is burdensome, especially for companies with limited IT resources. The easiest way to accept credit cards and remain PCI compliant is to partner with a payments vendor whose network is PCI compliant. Because your payments transact within their network, you are covered. Plus you get the benefit of your partner’s payments expertise!
Mistake #3
Limited Payment Methods
With the market adjusting to changing behaviors, businesses have an opportunity to evaluate their payment methods.
Consider offering options that take into account customer payment preferences.
Catering options to the customer will increase customer loyalty and increase your ability to gain new customers. Moreover, by accepting various payment methods, your company should begin to notice a measurable difference in on-time payments.
Mistake #4
Exposure to Manual Errors
As your business evolves, be aware of any inefficiencies that may hinder growth. Often, paper-based and manual processes are susceptible to processing errors resulting in increased costs and customer challenges.
Avoid manual mistakes that may cost time and money, and put important customer relationships at risk.
By adopting an accounts receivable automation solution, teams are freed to solve more critical customer challenges and focus on relationships. As a result, companies experience improved operating metrics and employees gain great job satisfaction.
Mistake #5
Manual Collections and Policies
that Create Work
Automation is your friend and can have a positive impact on the daily activities of your team.
Automation increases productivity by getting rid of numerous pain points, allowing for better, faster, smarter A/R processes that yield the best possible results. With automation, your team can save time by eliminating spreadsheets and pages of paper reports, reducing lost invoices or late payments, enabling quick access to customer and invoice data, and automating cash application.
Mistake #6
Inertia – “We Have Always
Done it This Way”
There is a reason Forbes magazine refers to this as the “most dangerous phrase in business.”
When a company fears change instead of embracing it, they put a scaling business at risk. It can be tempting to stick to a tried-and-true approach, especially if that approach has brought success and security. However, businesses have the opportunity to increase growth potential by adapting to new technology and products. When a business takes the initiative to ask what improvements can be made, they put themselves in a position to be at the forefront of their industry.
It’s crucial to anticipate challenges and to meet them head-on with a knowledge of best practices, and what to avoid.
An important first step is moving to an electronic automated solution that helps accounts receivable teams steer-clear of mistakes so they can focus on their customers.