How to Master Accounts Receivable in the Restoration Industry
As an employee or business owner working in the construction and restoration industry, one of the most common areas of struggle lies in accounts receivable.
Holding the knowledge to run an effective accounts receivable program can allow your business to make strides ahead of the competition. After all, there is arguably nothing more important than solid, consistent, and reliable cash flow.
“World-class accounts receivable” is much easier to say than implement, so what are the necessary building blocks needed to operate a successful AR program? When is it necessary to take a more aggressive approach at collection? What tools do I need to equip my AR team with for success?
These are just a few of the many questions we asked our panelist Brittney Hensley in our recent webinar. We were fortunate enough to have her sit down with us and walk us through what it takes to truly master your accounts receivable.
Communicating Expectations with Clients Around Payments
One of the key steps that needs to be taken if you want to avoid accounts receivable issues before they even start is communicating expectations of when you expect payment.
If a client has clear and defined instructions for when they have to pay their fees, they are far more likely to pay on time, as opposed to not outlining expectations and contributing to a sense of “pay whenever” attitude. What are some of the most effective ways can we communicate these expectations?
Working with legal professionals to create any required documentation that outlines payment structures and due dates can be very beneficial. Likewise, maintaining consistent dialogue with the customer and updating them throughout your service delivery will also help them feel included and aware of what’s going on. Brittney Hensley says that, “Typically, customers start regressing and you can see that attitude change when they feel like they don’t know what’s going on”. Legal professionals and proper documentation will ensure customers know exactly what is expected of them.
What Type of Person Makes for a Great AR Collection Employee
Working as an employee whose job it is to make some of these collection calls be difficult. Many customers are still in distress after losing their homes to fires or floods, or are angry and upset at the cost of the restoration project.
Not everyone is cut out for AR collection, so it’s important to understand how to train your AR staff, and what to look for in a good collection employee.
Here are some of the major factors to look for, and instill in your AR employees to make for the most effective collection:
- Remove emotion from the conversation
- Be professional
- Be factual
- Be kind
- Be a good listener
Instilling these qualities and practices into your AR employees and program will make them much more effective at collection and according to our panelist Brittney, has led to success and quicker payments time and time again.
When is Necessary to Take a More Aggressive Approach at Collection?
If you’ve worked in the restoration industry, or any contracting business, it’s more than likely there’ve been times when you’ve felt frustration towards a customer who just won’t pay for your services.
Unfortunately, frustration and anger won’t get you anywhere, but it might be time for a more professional, aggressive approach.
If you have tried contacting a customer with an overdue payment several times, it’s important to take note of how many times you have tried, along with the method of contact. Reaching out to them with factual information regarding how many times you’ve tried to contact them, including the method, will oftentimes spark more of a sense of urgency.
Possible next steps from there can include:
- Filing a lien- It’s important to update the customer on why that’s being filed, what it is, and how it works.
- Speaking with an attorney- Having an attorney draft demand letters and sending those to clients will have more effect than demand letters coming from your business or personal email.
These are last lines of defence for collecting on accounts receivable. It’s important that employees tasked with collecting AR are aware of the full story, and understand the circumstances facing the client.
Whose Responsibility is it to Make That First Call to a Client About Payment
There can be a lot going on during day-to-day operations of a restoration business. Deciding who needs to be making that first call to a client about payment can be confusing, and as a result gets put off.
Having a designated person who is able to reach out to clients about payments can make your AR collection much more fluid and consistent. Most of the time, this can be a project manager, the business owner, or an outside AR collection company.
Either way, the conversations should start from the moment the invoice is sent. Brittney suggests “Closing the gaps”, and ensuring the customer is educated at all times on when the invoice is sent, and when the check should be cut.
Most importantly, it’s important to promote a culture where everyone has a hand in accounts receivable collection in your business. All employees should be taking opportunities to educate customers about payment processes and outlining expectations.
If you want to learn more about Brittney Hensley and her business, you can find her contact information on her website, https://www.arrestoration.com/. She has over a decade of experience working in restoration insurance and accounts receivable, and can be a great resource to answer all your AR questions.
If you’re looking for other resources, KnowHow has step-by-step processes and templates built for you to help with all your businesses financial and accounts receivable needs.
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