Delinquent customer accounts can bring your small business' cash flow to a grinding halt. But before you hand over your bad debt to a collection agency you may want to revamp your own attempts to secure those overdue payments. Establishing a clear-cut system of debt collection that effectively uses all the tools at your disposal will greatly improve your chances of receiving your money.
As you begin to put together a system for recovering outstanding debt, you should first look at your accounting software. Several of the major accounting software vendors, such as Freshbooks, Wave, and Quickbooks Online offer a range of features that will help make your debt collection run more smoothly. Among other things, these applications can clearly organize and display all the information you may need regarding your customers and their outstanding invoices.
What to look for in Your Accounting Software...
There are four basic functions that will be the most helpful to your business when dealing with overdue accounts. Not all software packages offer these features so be sure to do some research as you work with your current program or switch to a new one:
2. Reporting the customer transaction history. The most powerful tool that your small business can have when it comes to debt collection is an accurate and detailed record of your customer's transaction history. Many accounting software packages will allow you to view the all the necessary information associated with an outstanding invoice, including customer's name and phone number, making it easier for you contact the customer and follow up on the outstanding payment.
3. Invoice tracking and management. With invoice tracking you will clearly see which of your invoices are paid in full, partially paid, past due or unpaid so you can clearly see who owes you money and when the payment is due.
4. Help with collection letters. A few software packages will help you compose professional-looking collection letters that can be sent out as payment reminders to your customers. The program can generate these letters with all the necessary details, such as the amount of outstanding debt and the date on which the amount was payable.