Managing accounts receivable (AR) could be a daunting task, especially when one mistake you make can potentially jeopardize the entire relationship you’ve built with your customers. If you have managed your company’s AR for a long time, you may have learned all the lessons already. But if you’re new in the role, it’s always better to prepare yourself ahead for problems you may run into instead of doing everything the trial-and-error way.
On that note, here are the four most common accounts receivable mistakes you want to avoid.
Mistake #1: Security – PCI Non-Compliance
If your company accepts credit cards as one of the payment methods, you’ll need to pay close attention to whether your business and the tools you’re using are PCI-compliant. Being PCI-compliant means that you follow the set standards and guidelines that help manage and secure credit cardholders’ data. Being non-compliant means you’re putting yourself and your customers at risk. You can be charged with PCI non-compliance fees and you could be heavily fined should your non-compliance lead to a security breach. Depending on the seriousness of the breach, your fine could be hundreds of million or even billion dollars. And the cost for PCI non-compliance doesn’t stop there. A security breach would seriously harm the relationships you’ve built with your customers.
Mistake #2: Limited Payment Methods
Let’s put yourself in your customers’ shoes: you’re narrowing down to two companies you want to do business with, one offering a variety of payment methods and catering to your personal preferences, and the other only providing you with one payment method: their payment method. Assuming that they provide equal benefits on everything else, which company would you go to? Now apply that to your business. Is it possible that you’re hindering your ability to gain new customers because you’re not taking into account their preferences when it comes to payment methods?
Mistake #3: Miscommunication & Human Errors
We’ve all received an email from a vendor or supplier where our name is spelled wrong. It happens. Human error. Maybe you don’t think you make that same mistake with your customers, but after processing thousands of invoices each month can you say with absolute certainty that you’re mistake-free? One mistake could be completely harmless, or it could ruin a relationship.
Maybe your team are responsible for too many manual tasks; time and resources constraint can easily lead to wrong decisions. Maybe there’s miscommunication. Sarah already called Mr. X to remind him about his past-due payment, but she forgot to note down the call, and someone else jumped in and called him again. John manually processed an invoice for company Y but was rushed at the time and forgot to include overdue policies on that invoice. Whatever the mistake may be, it could cost your business not only time and money, but important customer relationships.
Mistake #4: Head Count Problem
As your business grows, the AR workload grows along with it. Most people’s initial reaction is to hire more people to take on the extra work. Although adding more headcount may solve the problem in the short term, it’s not a sustainable or scalable solution. As your business grows, you should look for efficiencies. By bringing onboard solutions that automate much of the manual work, you enable your current team members to do more, allowing them to scale with the business.
Whether you have been making these mistakes without realizing it, or you are proactively looking for solutions to potential problems, I hope this blog has been helpful. Some of these issues could be easily resolved by implementing our recommended AR best practices.