How to Manage Your A/R and Make Your Cash Last

piggy-bankManaging your A/R is terribly frustrating, and simultaneously vital to your operational health — it’s just a necessary evil of running a business.

We learned the hard way just how important it is by waiting too long to start reaching out to some customers who were racking up large overdue balances.

This was bad practice for two reasons: 1) it makes it really hard for the customer to pay you back in a timely manner when their balance gets out of control, and 2) we were still providing services/subscriptions and just kinda hoping we would eventually get paid (sometimes we didn’t).

And while things ended differently in each circumstance, it would’ve been a lot less trouble to just stay on top of it from the get-go.

Hopefully our learnings can help save you some time, heartache, and cash…

Managing Your A/R

It took us a while to look at it this way, but we eventually realized that like everything else, A/R is more manageable with a repeatable process in place.

Like many of our other long-running processes, we got started with a Google sheet — it detailed total amounts due by customer, number of invoices past due, a record of emails/phone calls, customer response and payments made. It was a great tool for accountability, but we eventually outgrew its effectiveness.

Since we love to find ways to automate processes at RevBoss (especially when it involves friendly persistence and follow-up!), we searched for tools that would integrate with our accounting system and automate the tedious follow-up process — like InvoiceSherpa.  

Just set up an email cadence for customers with overdue invoices (much like how you set up a RevBoss Flow), and voila! You won’t have to keep manually tracking people down.  

Making Your Cash Last Longer

If you’ve got a backlog of overdue accounts, it’s really important to make the cash you have on hand last as long as possible.

Get Paid Up Front

One of the easiest ways to manage cash flow in an early-stage company (or really, at any stage) is to ask for payments up front. If a customer signs a 3-month contract for $600/mo, bill them for $1800 up front and don’t start the agreement until you get paid in full.

Most customers don’t have an issue with this type of agreement, but you can throw in an incentive if they’re hesitant — tack on an additional two weeks to the end of the agreement, or waive your on-boarding fee. Extra/free time will be well worth the trade-off.

Credit Card Payments > Invoicing

Invoicing is a surefire way to get stuck in a huge overdue A/R backlog — getting your customers set up on automated, monthly credit card payments basically eliminates the problem as soon as you start.

Using a system like Stripe takes the pain of collecting off of your plate, and you get paid immediately. If a credit card fails, the subscription just stops — opposed to continuing to provide a subscription or service and hoping that you eventually get paid. 

These things have made our A/R much more manageable — now, instead of one person spending 50% of their time on collection efforts, the processes just happen in the background…which is exactly the problem we set out to solve.