Written by: Awais Ghaffar
If you’re like most businesses, you’re relying on accounts receivable (AR) to keep your business afloat. But what happens when those payments start to lag? You might have a process in place for collecting aged accounts receivable, but it might not be as effective as it could be. In this blog post, we’ll explore some strategies for collecting aged accounts receivable in your revenue cycle management process. From outsourcing to collection agencies and more, we’ll help you get a handle on those delinquent payments and keep your business running smoothly.
The problem with aged accounts receivable recovery
The problem with aged accounts receivable is that they can be a drag on your business's cash flow. When customers don't pay their invoices on time, it can put a strain on your working capital and make it difficult to meet your own financial obligations.
There are a few strategies you can use to collect aged accounts receivable and improve your cash flow situation:
- Send out reminders: Send polite reminders to customers who have outstanding invoices. This may prompt them to take action and pay their bill.
- Offer discounts: You may be able to entice customers to pay their bills by offering a discount for early payment.
- Use collection agencies: If all else fails, you can turn the account over to a collection agency that will use more forceful tactics to get the money owed to you.
While these strategies may help you collect some of the money owed to you, they won't solve the underlying problem of why customers aren't paying their bills on time. To truly fix the issue, you need to get to the root of the problem and figure out why your customers are falling behind on their payments. Once you know what's causing the issue, you can put processes in place to prevent late payments in the future.
The revenue cycle management process
The revenue cycle management process is a critical part of ensuring that your business is able to collect on its aged accounts receivable. There are a number of different strategies that you can use in order to increase your chances of collecting these outstanding amounts, and it is important to consider all of your options in order to find the best solution for your business.
One common strategy for collecting aged accounts receivable is to offer a discount for prompt payment. This can be an effective way to incentivize customers to pay their outstanding balance, and it can also help to improve your cash flow. Another option is to set up a payment plan with the customer, which can help them budget for the repayment of their debt.
If you are having difficulty collecting on an aged account, you may also want to consider using a collection agency. Collection agencies specialize in pursuing outstanding debts, and they may be able to help you recover the money that you are owed. However, it is important to remember that using a collection agency will likely result in additional fees being added to the outstanding balance.
The revenue cycle management process is critical for businesses of all sizes, and there are a number of different strategies that you can use in order to collect on outstanding debts. It is important to consider all of your options and find the solution that works best for your business.
Tips for collecting aged accounts receivable
If you're like most businesses, a large portion of your revenue comes from accounts receivable (A/R). And if you're like most businesses, a significant portion of your A/R is aged, meaning it's been outstanding for more than 30 days. Collecting on aged A/R can be challenging, but it's essential to maintaining a healthy cash flow. Here are some tips to help you collect on aged accounts receivable:
1. Understand why the invoice is aged
Before you can take steps to collect an aged invoice, it's important to understand why it's aged in the first place. There could be a number of reasons, such as:
- The customer is disputing the charges
- The customer has financial difficulties and is unable to pay
- The customer never received the invoice
- There was an error on the invoice
Understanding the reason for nonpayment will help you determine the best course of action for collecting the debt.
2. Communicate early and often with your customers
Proactive communication with your customers is key to preventing invoices from becoming aged in the first place. When an invoice is generated, make sure to follow up with the customer right away to ensure they received it and that there are no questions or concerns about the charges. If payment isn't received within a reasonable timeframe, reach out again to inquire about when payment can be expected.
The benefits of collecting aged accounts receivables
There are many benefits to collecting aged accounts receivable. Perhaps the most obvious benefit is that it allows you to keep your business running smoothly by ensuring that you have the cash flow you need to cover your expenses.
In addition, collecting aged accounts receivable can help you improve your relationships with your customers. When customers know that you are actively working to collect payments, they are more likely to respect and appreciate your efforts, which can lead to improved communication and collaboration down the line.
Finally, collecting aged accounts receivable can also boost your bottom line. The sooner you collect on past-due invoices, the less interest you will accrue on those balances. In addition, if you offer early payment discounts, you may be able to save money on future purchases made by customers who take advantage of those offers.
Conclusion
There are a number of strategies you can use to collect aged accounts receivable in your revenue cycle management process. The most important thing is to be proactive and take action as soon as an invoice becomes overdue. Use a mix of methods to reach out to customers, including phone calls, emails, and even snail mail. And consider using a collection agency if you're having trouble getting paid. By following these tips, you should be able to collect the money that's owed to you without too much hassle.
About the Author
Awais Ghaffar has been working as a medical billing expert for the past five years with a well-known and reputed medical billing services provider Medcare MSO. Awais is known for her expertise in Healthcare Information Technology, Revenue Cycle Management Training, Healthcare Management and her unique tactics to deal with medical billing claims.
