Accounting: Billing & Accounts Receivable¹

Accounting: Billing & Accounts Receivable

Talk about irony. In an industry that rides on proper management of finances, accounting professionals - especially those with smaller, independent businesses - don't always know how to keep the billing and receivable cycles steady and fluid. Even worse, research shows that inconsistent invoicing practices can lead to costly collection procedures, and even lawsuits.
The right technology helps, of course, but many pundits point out that it's also a matter of sound protocols, especially in these post-Enron days - when the entire field still comes under a microscope. The tips and guidelines listed below summarize the wisdom of experts from every segment of the industry. Adopting even one or two (although all would be ideal) will do a lot to grease the revenue wheel.

Set expectations. Launch the client-account relationship by describing billing and collection systems in clear terms. Explain the invoice process, when monies are due and what forms of payment are acceptable.

Establish the rules. All too often, friends or wily clients may try to get around an accounting firm's policies and procedures. Once terms have been established, the wise business owner will enforce them, regardless of personal ties.

Write it down. Present a written estimate of service costs before beginning any project. This should include hourly rates, projected time requirement, tasks, deadlines and protocols. Submit a second copy of the estimate after the job wraps up.

Track billable time. Keeping detailed records of every function spent directly on individual client service is the only way to make sure potential receivables don't get lost. This includes documentation of appointments, phone conversations, research tasks and correspondence. Many scheduling products - easily integrated with existing programs and systems - truly can simplify this chore.

Bill immediately. To reduce an invoice pile-up at month's end, it's a good idea to invoice clients directly after a project's completion, or at predetermined stages. Again, a range of accounts receivable software available in today's market facilitates this sort of running cycle by making updated client data available at a keystroke.

Issue client-friendly bills. Itemize all components of a particular service, and ensure that payment amount, terms and due dates are printed in a clear and understandable format. Including a "hotline" number, e-mail address or Web site addressing questions and concerns likewise is a smart move.

Dole out billing chores. Integrated office systems now allow business partners to do their own individual invoicing once they receive the appropriate training. Distributed billing not only saves time, but tends to reduce errors, since each accountant is responsible for his own clientele.

Schedule billing "appointments." �The billing and receivable ritual requires a dedicated place on the weekly calendar - especially in smaller firms where the owner does the invoicing. Inconsistent attention to these matters spawns revenue losses at best, and irritated clients at worst.

Go online. Besides improving efficiency, online services allow the accountant to instantly access client's documents during the billing process. Since the system virtually eliminates the expense of paper, postage and administrative support, savings in time and cash can be significant.

Accept payment by credit card. By doing this, a business owner can get receivables into the bank within a couple days rather waiting out a billing cycle. Some fees are involved, but experts point out that these outlays are negligible, in light of saved time and paperwork.

Make prompt payment worthwhile. Client incentives, such as discounts for early payment, can keep the cash flowing. These rewards can be as simple as knocking off a few dollars when checks arrive within 14 days of billing, rather than the standard 30-day period.

Work on late payments. Collect delinquent revenues in a timely fashion - sometimes, this means being persistent. Check on a payment that's a week or 10 days overdue with a friendly phone call to the client. Or, if this doesn't work, send a late notice - then another. Though the task can be unpleasant, it's critical to document all payment requests with appropriate correspondence. Likewise, describe in meticulous detail exactly what will happen if the bill remains unpaid.

Think "retainer." Retainers typically involve a client-accountant agreement guaranteeing a predetermined number of service hours monthly for a negotiated, set fee. This type of arrangement benefits the business owner in two ways: It simplifies billing and guarantees consistent cash flow.

Admit to and correct mistakes. Delinquent clients sometimes refuse to pay because they believe their accountants have erred. When this happens, it's best to admit culpability and renegotiate fees based on services that have been completed to the customer's satisfaction.