An accounts receivable (A/R) process is based on a fee agreement, but it really starts when an invoice is sent out. At that moment, you've created a receivable that should be tracked through to collections. Here are the primary components of an accounts receivable process:
- Payment policy - when is payment due? This should be on your invoice and in your agreement. (Morgan/Foonberg in How to Draft Bills Clients Rush to Pay recommend using "Total Now Due" and "Total Now Due and Overdue" on invoices)
- A/R aging report- at least once a month you need to pull a report of all outstanding balances and the days they are outstanding. This is to prioritize collections and to help you manage cash flow. Set this up as an ongoing part of your billing process.
- Collections process - action you will take for each category of aging. Actions might include issuing an overdue bill, writing a note on the overdue bill, making a collections phone call, negotiating options for payment and payment plans, and the like.
- Write-off policy - when will you deem the invoice uncollectable and write it off?
Managing accounts receivable is part of your job as CFO. You can delegate it if you have staff or if your accountant provides the service- otherwise, you need to plan the time to get it done. As always- put it on your calendar, in your CFO timeblock.
If you're owed money, start monitoring the outstanding balances and taking action every month on a scheduled basis. Once you've cleaned up any outstanding invoices; you'll find that managing the problem will prevent it.