Tracking Accounts Receivable and the Art of Getting Paid, Fast
One topic we frequently address in the subcontractor space is how can one track receipts and get paid as quick as possible. What can we do to automate the payment process, get paid faster, while not pestering our respective customer?
Three solutions we’ve identified include but are not limited to:
- Deploy an Aging report that is generated daily with updated outstanding balances; in real-time
- Segment or adopt an Aging Report to provide Retention balances by project
- Create an alert system around non-typical time frames for collections
The days of monthly collection practices once monthly financials are complete have come and gone. With new demand for starting projects faster than they can be completed, financially closing projects has never been more important. Do we know when we’ve received payment? Do we know when we invoice customers? Adoption of a system that gives you real-time reporting is just the brink of the iceberg, but a step that is more important than ever as subcontractors are flooded with commercial projects, a theme that appears to have no end in sight. ERP systems allow for collaboration across multiple departments, offering visibility on project status and performance unparalleled to any monthly financial report.
Do you wait for Retention billing(s) to be requested by the General Contractor? General Contractors all operate differently, with one practice that remains prevalent is gobbling up a portion of subcontractor billings each month to “maintain” project quality and schedule. Combating this practice, although can be difficult, can always start at 50% completion. Attempts to relieve retention funding as milestones are met in the project lifecycle is one opportunity to advance a subcontractors cause so long as Jobsite Progress is measurable, a topic we will bridge in an upcoming blog. TRUE’s customized Aging Report goes above and beyond the limitations of conventional bookkeeping software and gives you the insight we all seek: How much money is on the table right now?
When we discuss the alert processes in ERP systems, it’s easy to simplify or overcomplicate alerts that propel users into confusion. No larger failure is a system that designs a dashboard full of alerts all to be tossed into the trash, creating one more set of clicks while generating no productivity. If and when subcontractors do utilize an alert process via ERP systems, the typical 30, 60, 90-day increments are a general rule of thumb. The reality is the General Contractor’s payable report is also looking at the exact time frames. The General Contractor knows when statements are coming and react, or rather, dismiss these attempts as they are standardized and easy to “slip through the cracks”. Although automation of the collection process (whether that is sending routine statements on or shortly after payment is due) is a logical practice, focusing on breaking the habit of typical collection process is paramount. At TRUE, we allow for a customizable alert process for Accounts Receivable teams to begin collection processes at 16, 45, 54 days; thus, separating your business from other trades all conducting the same activity, at the same time, all seeking the same thing: collecting the cash. Subcontractors don’t experience hardship due to lack of profit, it’s cashflow that is the culprit. Shaving Accounts Receivable days can free cash for investment opportunities, add additional equipment and most importantly, keep up with the wage increases we all know continue to expand.
Allow TRUE to provide the technological solutions to the age-old response: ‘You get paid when we get paid’.