It is very important to keep payments and collections up to date in a company, as it is essential to have better control of the accounting. This process can be done through tools that help manage and optimize these functions.
Suppose a company suffers a situation of non-payment. The whole organization can be severely affected, so it is essential to have good collection management for both national and international customers.
If you want to know more about how to achieve the goal of keeping your collections up to date, we are going to give you a series of recommendations that are easy to carry out by the company.
How to improve collection management?
To improve collections management, we can put some of the following tips into practice:
Know your customers
It is not a matter of distrusting customers, but it is important to know their solvency to avoid non-payment and late payment problems. It is always better to prevent defaults than to solve them, so good communication with customers is necessary to avoid compromising situations in which you have to demand payment of invoices.
Encouraging early payment
One of the measures to improve collection management is to offer some incentive to pay early. For example, we can provide discounts if invoices are paid in a short period.
Taking out credit insurance
Credit insurance is a great ally in avoiding default on payment. It is responsible for guaranteeing the collection by a company when a situation of non-payment occurs due to the insolvency of the debtors. This insurance is very useful for avoiding the risk of non-payment in commercial transactions between companies.
Specialized companies or insurers such as Coface offer credit insurance for both national and international sales. Companies such as Coface study and classify the clientele of the insured company and provide information on the amount of the commercial credit lines covered by the insurance.
Thanks to this preliminary analysis, insured companies can know the risk of non-payment by their customers or future customers. And also have the peace of mind of knowing that they will repay them per the clauses of the policy taken out. For this reason, the best way to have peace of mind is to take out credit insurance.
Using a management program
A very useful way to monitor collection management is to use a specific tool for this process. Some companies continue to use programs such as Excel, which, although useful, can waste a lot of time carrying out this task manually. They can make mistakes, so it is better to have this process automated.
The solution to speed up collection management is to use specialized companies such as Coface or gestorías. It is also possible to use online invoicing software that records invoice payments and monitors the movements of the bank account, as it can be connected to the company’s bank. In addition to being more productive, thanks to these tools, data can be consulted and shared from any computer, with all the information synchronized in the cloud.
Inform about the terms and conditions of collection
To keep the company’s financial health in good shape, it is essential to make the protocol for payment very clear. When establishing these conditions, it is necessary to indicate the due date and how to carry it out, specifying how the amount can be paid (card, bank transfer, etc.).
The company has to provide the billing information in a very clear way and, in addition, it can also inform about the consequences in case of non-payment.
Setting out these conditions can explain the type of interest that may apply if the deadline for settling invoices expires and other effects that may have repercussions both on the services provided and on relations between the company and the client.
Control of receipts and payments
To avoid liquidity problems, it must be considered that there is an agreement between the payment date that the company must meet (for example, with suppliers) and the payment date that customers must meet. In other words, if suppliers demand a very short payment period but customers are given a wider margin, the company may lack liquidity.
If you want to prevent this type of problem, the best thing is to create a plan that protects the company. If there is a delay in payment, it is necessary to draw up a report of outstanding payments and classify them according to the due date or amount.