Do you have a system in your business to collect your money timely? There are the 3 major components to having a solid AR process in place. Get these right and you will start collecting your money a lot faster!
Controls
Controls are all the things you have in place to make sure you get your money in a timely fashion. This includes payment terms and late penalties on your contracts. It includes payment terms on your invoices. It includes speaking language about payments to customers at every step of the process of their job. It includes terms with your subcontractors that holds up their money when they don’t properly complete a job that’s affecting you from getting paid.
Communication
Communication is all about how you are communicating with your customers on how and when you expect to be paid. If you’ve set up decent controls you have a great start on this. Now it is a matter of making sure your customer is aware of those controls and understands what they mean.
It also just means being an effective communicator with your customer throughout the sales and production processes on when you expect payments. This could be the down payment you expect when signing a contract. It could be the expectation of receiving a payment in full the day of job completion. It doesn’t matter what it is as much as it does that you’ve clearly communicated with your customer.
System
This One is massive. I don’t know how many businesses I see that don’t have an effective way to get the money they’ve earned collected from customers. An AR system is having a series of events that happen throughout the collection process.
It doesn’t just start after the job is completed either! A good AR system starts from the first time that you collect money from a customer.
For example: making sure you’ve collected the down payment that you require before starting a job. Having a system to make sure a final walk-through is scheduled immediately upon job completion to speed up the collection of your money. Then, having the other systems on the backend set up for your accounting team. This would include things like sending out emails with invoices, sending out past due notices, making calls to custoomers that owe money, etc.
Every businesses AR system will be different but the key is that you have one and that you follow it.
Inside the Leveled up Program we go through our step-by-step process for collecting money and keeping cash flowing into the business. If you want to start collecting your money timely and have a system that you can implement immediately in your contracting business check out the Leveled Up Contractor Program.
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