Accounting and Bookkeeping

5 Easy Steps to Successfully Manage Your Receivables

5 Easy Steps to Successfully Manage Your Receivables

Every organization needs a well-ordered process to ensure cash keeps flowing into the organization. This allows you to fund your program objectives, keep borrowing to a minimum, as well as pay all of your hardworking employees. Here are five steps to successfully manage your account receivables. 

  1. Document the steps for Accounts Receivable in your accounting policies and procedures manual. Nonprofit organizations often shy away from documenting these policies because they don’t know where to start or what it should look like. It doesn’t have to be board approved or use confusing accounting terminology. It just needs to lay out the steps for when members, grantors or customers are invoiced, who enters the invoice, what is included on the invoice and who enters the transaction into the accounting system. If your organization utilizes contracts before undertaking new work, you should document the steps for these also. 
  1. Send out complete and timely invoices. Ensure that the invoice includes all of the relevant information and is sent in a timely manner. Make sure invoices are dated and numbered and include a due date. Including your organization’s ACH information will make collections quicker and including contact information for accounts receivable will assist in getting discrepancies resolved in a timely manner. Itemized invoices provide greater clarity and make sure that past due invoices that are included are added on separate line item and indicate a “Statement Balance.” Lastly, a ‘thank you for your support’ is always a nice addition. 
  1. Establish proper internal controls. The person issuing invoices should not also be recording cash receipts. In a small organization, consider adding additional oversight to cash receipts if this is the case or have someone outside the organization assist with the process. 
  1. Get to know your payer. The person who you work with to approve membership or grants is probably not the person actually ensuring that the check gets cut. When possible, get to know the Accounts Payable processor at these organizations to get the real story on why payments seem delayed. These people have the inside track on how organizations operate internally and often they can tell you what you need to do to get paid faster. 
  1. Automate when possible. There are various online AP and AR systems that are easy to use. If your payer utilizes an online AP system, you might be able to submit your invoices in an automated fashion (scan, email, drag & drop) and this can really speed up the process.  On your side, there are online AR systems that can help you automate and collect more quickly. When collecting payments using systems and credit cards there are fees. Compare these carefully – credit card collection fees can add up.