5 Key Steps for Managing Your Accounts Receivable

Did you know that every 30 days an invoice goes unpaid you’re essentially writing off a business loss?

“It’s true,” says Quan Ly, Partner at McRally Accounting. “People have a habit of extending credit to customers who aren’t properly qualified and then not getting paid. It can put you out of business.”

It’s a real problem for many small field services businesses that suffer from an inability to make payroll, or buy essential supplies, when customers are slow to pay.

“When you extend credit to someone, you are essentially acting like a bank,” says Ly. “Bigger companies do extensive credit assessments on customers but smaller ones typically don’t have the time or resources. If that’s the case for your business, extending credit isn’t worth the risk.”


When you extend credit to someone, you are essentially acting like a bank. Bigger companies do extensive credit assessments on customers but smaller ones typically don’t have the time or resources.

Quan Ly, Partner, McRally Accounting Quote

A sounds accounts receivable process

Step 1 in setting-up your accounts receivable (AR) process (and you should never skip it) is to determine if credit can, and should, be extended to a given client. “Many people skip this step and end up learning the hard way,” says Ly.

Step 2 is to make sure that everything about how and when you get paid is documented, agreed to and understood by all parties. “You need to set that expectation up-front,” says Ly. “Consider charging interest for amounts outstanding past the due date. You can also incent the customer with discounts for quick payments, like within 5 days.”

Step 3, which should happen immediately after the service is provided, is to send the customer a complete, itemized invoice that clearly states financial terms and provides instructions for remitting payment. “Mobile payments are a great option, and the solution Jobber provides is excellent for field service companies,” says Ly. “You’re swapping 2.9% for managing a lot of risk out of your business.”

Step 4 is to remind the customer at, or just before the due date, of the payment requirement. There are a number of online accounting tools that allow you to automate these reminders, like QuickBooks Online (which integrates with Jobber).

Step 5 (if things get to that point) is to ratchet-up collection efforts in correlation with lateness of payment. “After all efforts have been exhausted and the customer still hasn’t paid, send a final notice stating that the account will go to collections, if that’s what you intend to do,” says Ly.

By the time things have gotten this far, you should be pulling in additional resources to aid in the recovery process. “Consider talking to a lawyer as to how to approach things legally and how to word your communication,” says Ly. “It’s a sensitive area.”

What a write-off does to your business

If you’ve run through the whole accounts receivable process and still been unable to collect you may be forced to write-off the lost revenue. What does that mean, exactly?

“A write-off is basically a bad debt that is owed but will not be paid,” says Ly. “Usually, you’ve already recognized the income, for example your spreadsheets reflect that you are owed $5,000, but you have to write-off a $5,000 deduction because the money never came in.”

That net-zero on your books may not seem serious, but let’s remember that you have already taken all the expense of providing the service (e.g., labor, fuel, parts and supplies, overhead) “The net effect is that, not only do you not have any ROI, you’re actually taking a loss for your efforts,” Ly explains.

Typically, any invoice that goes unpaid for 60 to 90 days is likely heading towards being a write-off. “When we run accounts aging reports, we can watch these move into the danger zone,” says Ly. That’s why it’s important to get credit checks done and set clear terms before you provide any service.

Easy to implement accounts receivable tools can help keep you on track

In addition to using Jobber to manage field service workflows and stay on top of invoicing and payments, Ly offers his take on an ideal ‘tech stack’ for running your accounts receivable process end-to-end.

“First of all, use mobile payments and get paid on-site, as soon as the job is done,” he says. “From there, I’d recommend [accounting software] for basic bookkeeping and reconciliation, and Receipt Bank for recording expenses and coding transactions.” (Editor’s note: you can have employees track expenses in Jobber as a single collection point)

“If you’re just not comfortable keeping your own books, outsource your AR process to someone who knows what they’re doing,” says Ly. “It’s a small additional expense, but it’s a lot cheaper than failing to collect what you’re owed, or a financial reporting mistake that ends up costing you big down the line.”

Why do your accounting and bookkeeping in the cloud? Jennie Moore, bookkeeper and Intuit Quickbooks Firm of the Future finalist explains the (many) benefits.



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