Experience a record-setting sales month? You may want to forego the celebration until payment arrives.

Too often, companies get caught up in sales volumes and fail to dedicate adequate resources to the other side of the sales equation—accounts receivable. The objective of business is profit, after all, and businesses must be persistent and proactive in the practice of collecting money from customers when it’s due.

Pursuing overdue accounts is never easy or enjoyable, but by establishing a system of organized bookkeeping, clear credit terms, and the right collection procedures, your company can create a successful accounts receivable program.

Here are some ways to keep a handle on collections and maintain a favorable cash flow.

• Discuss terms upfront and early on. Collecting payments is a process that starts well before the sale is ever made. Have a discussion about terms and be clear about payment expectations prior to receiving customer orders or signing clients. Once you and your customers reach an agreement, put it in writing as part of your estimate or order acknowledgement.
  
  
• Be diligent when opening new accounts. Be sure credit applications request all the right information, including credit references and the person to whom invoices will be addressed. Then send the new accounts payable contact a welcome letter of introduction that also outlines payment arrangements. And always follow up on credit references.
  
  
• When appropriate, request partial payments in advance. In service industries and on very large or custom orders, it can be common practice to require a portion of payment in advance, a fraction more at the mid-point of the project, with balance due upon completion.  Again, spell out terms clearly when drafting any estimate or contract.
  
  
• Invoice correctly and promptly. Timely invoicing is essential to a reliable cash flow. Many companies issue invoices within 24 hours of the delivery of goods or services. Moreover, your internal accounting procedures must be in good order to avoid embarrassing errors like incorrect invoices or failure to record a payment that’s already been submitted. Make certain all invoices are accurate, and clearly state the payment terms and due dates.
  
  
• Develop a system for collecting unpaid invoices. Create a reporting tool to track payments due and those past due, and implement uniform collection procedures. Establish targets, priorities, and timetables to make the most of limited resources. For instance, sort customers by debt size and telephone all key accounts first, working down the list according to money owed. For major customers, personal visits may be warranted. For smaller accounts, create a timetable for mailing reminder letters. A reporting tool will also help identify possible payment trends, providing you with the documentation you need to deal with habitually late payers.   
  
  
• Use third parties when necessary. To spare your resources and get back to the business at hand, consider outsourcing the job of debt collection. Some agencies charge a flat rate while others take a percentage of the amount collected. Determine the point at which undisputed debts will be turned over to a third-party, either by their value (under or over a dollar amount) and/or the length of time the debts have been pursued (anything over 12 months).