What You'll Learn

Having a clearly mapped process for how revenues become cash is important. This article will help you think through the most important steps in the journey to getting paid.

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Increase Cash In

Maximize Your Cash on Hand

Current Take: COVID-19

The COVID-19 crisis has highlighted the importance of having a clear understanding of how and when your receivables are paid, i.e. when you collect cash for goods or services. Knowing this information will allow you to better understand the impact of a downturn and to ask for and also provide flexibility to support your business ecosystem.

The Journey From Contract to Cash

Generating sales for your business is exciting — however, converting sales into cash should be a priority. This is especially important for B2B businesses, for whom there is often a longer period between a sale and the collection of cash generated by that sale. Having a detailed understanding of your invoicing and collection processes can give you insight into factors that affect the timing of cash coming into your business.

Why Map Your Process?

Processes around collecting receivables are often created organically, not as a result of careful planning. Take some time to map out your receivables process, so you can:

Identify bottlenecks or activities that are unnecessary or cause delays.
Increase and improve communication between your sales and financial areas.

How to Map Your Process

To map your receivables process, identify the following four items:

Current invoicing and collection activities occurring
The person/area/system responsible for them
The interconnection between these activities
The outcome for each activity

See the Receivables Process Map below for best practices and considerations while building your own process.

Receivables Process Map

Activity 1 of 5: Determine or revisit your payment policy

Determine the appropriate payment methods, incentives and credit policies for your customers by creating different segments. Consider segmenting by factors such as level of spending or length of relationship.
Conduct a professional credit check before extending credit to clients.
Make sure to clearly communicate payment policies to employees and clients.

Things to consider

Understand available payment methods and provide options. Some of the most common methods are ACH (transfer from one bank account to another), credit cards, debit cards, electronic checks, check by email, Zelle^1,2,3,4 and other payment gateways, such as PayPal.

Activity 2 of 5: Create an invoice immediately after product or service is delivered

Enter Purchase Orders into system when they are received.
Verify that the invoice has correct information, appropriate terms and that all payment options are communicated visibly and clearly.
Send the invoice electronically when products are delivered.
Request a confirmation of invoice receipt (call or email confirmation) to ensure invoice sent to the correct person.

Things to consider

Consider using a system that notifies you when products are delivered against Purchase Orders, so that invoice is created immediately after products/services are delivered.

Use clear terminology; don't assume clients understand options.

Invest in software (cloud-based solutions can also be viable options) to reduce time and human error in invoicing and collecting.

Activity 3 of 5: Monitor accounts receivable

Create accounts receivable reports for weekly review.
Create a policy for following up with customers, clients and partners.
Come up with mutually acceptable solutions when payments are late.

Things to consider

Consider the following suggested policy for overdue payments:

25 days: Send friendly reminders to maintain current account.
45 days: Call the billing department to ensure the right person is receiving and processing your invoice.
60 days: Call and negotiate or provide alternate solution.

Maintain relationships with good clients and make sure to understand who is responsible for processing checks/payments.

Activity 4 of 5: Receiving payments into your account

Monitor bank account for direct deposits.
Assign responsibility and schedule for depositing paper checks.
Cross-check deposit in system with original P.O. or invoice.

Things to consider

If possible, integrate receiving payments into your website.

Activity 5 of 5: Evaluate and adjust process

Maintain a payment history for each client.
Identify chronic late-payers and reevaluate relationships.
Identify adjustments to smooth your receivables process.
Make sure you are up to date on client payment process requirements, as they may have changed.

Things to consider

Reward reliable track records with personalized thank you notes or consider offering incentives.

Reevaluate terms for those with less than perfect histories. An adjustment in invoice delivery method, timing or frequency might be all that's needed to resolve ongoing issues with overdue payments.

Closing sales may be more exciting than the paperwork that follows, but collecting the cash generated by these sales is critical to your success. You now have an understanding of best practices to employ to avoid pitfalls. Read more to see how one business took steps to improve its collections process.

Chase Mobile^® app is available for select mobile devices. Enroll in Chase Online or on the Chase Mobile app. Message and data rates apply.
Transactions typically occur in minutes when the recipient's email address or U.S. mobile number is already enrolled with Zelle. Select transactions could take up to 3 business days.
Chase QuickPay^® with Zelle^®: Enrollment in Chase QuickPay^® with Zelle^® is required. To send money to or receive money from a small business, both the sender and recipient must be enrolled with Zelle directly through their financial institution. Both parties need a U.S. checking account enrolled with Zelle; only one needs an eligible Chase account. Small businesses are not able to enroll in the Zelle app with a debit card and cannot receive payments from consumers enrolled in the Zelle app. Transactions typically occur in minutes when the recipient's email address or U.S. mobile number is already enrolled with Zelle. Select transactions could take up to 3 business days. Enroll on the Chase Mobile app or Chase Online. Limitations may apply. Message and data rates may apply.
Users must have a bank account in the U.S. to use Zelle.

Zelle and the Zelle related marks are wholly owned by Early Warned Services, LLC and are used herein under license.

For Informational/Educational Purposes Only: The author’s views may differ from other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone, and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions, and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.