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How Can Trade Receivables Be Reduced

To reduce trade receivables, a company should invoice clients within 48 hours of fulfilling a request, send invoices electronically instead of mailing them, establish clear payment terms including due dates and accepted payment methods, offer discounts for early payment, require deposits on large purchases, and work with a collection agency if payments become overdue rather than waiting too long to receive owed funds.

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Jolianne SalvadoOfc
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95 views2 pages

How Can Trade Receivables Be Reduced

To reduce trade receivables, a company should invoice clients within 48 hours of fulfilling a request, send invoices electronically instead of mailing them, establish clear payment terms including due dates and accepted payment methods, offer discounts for early payment, require deposits on large purchases, and work with a collection agency if payments become overdue rather than waiting too long to receive owed funds.

Uploaded by

Jolianne SalvadoOfc
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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How Can Trade Receivables Be Reduced?

Since trade receivables is the total amount owing to a company, that company
will want to see that amount reduced by having its invoices paid faster. Here
are some suggestions on how your business can do that:

INVOICE IMMEDIATELY

Often a company will take a week or two (or longer) to get an invoice out after
its product has been delivered or it has finished providing a service. That time
equates to money. When invoicing is delayed, payment is delayed, meaning
the company can’t use those funds for something else. Invoice within 48
hours of fulfilling a client’s request.

MAIL INVOICES AS A LAST RESORT

Electronically send your invoices through email. This will speed up the time it
takes for your client to get them, meaning processing is likely to happen
sooner.

ESTABLISH PAYMENT TERMS

If you’re not clear on when your company wishes to get paid, then clients can
and will take their time paying you. If you need payment quickly, consider “due
upon receipt” as your payment term (however, best to ask clients about this in
a conversation first, at the beginning of a transaction, rather than surprising
them with this information on an invoice).

If you take PayPal or credit card payments, put that information under the
payment terms as well. That too can speed up how fast your company
receives payment.

CONSIDER DISCOUNTING

Consider offering a discount for clients who pay you early. This does not have
to be a large amount, it can be 5% or a flat dollar figure, but if it’s a company
that will be doing a lot of business with you, chances are they will appreciate
it.

Be specific, include the exact date on the invoice that a payment will have to
be received by, to be considered “early” and to receive the discount.

ADD DEPOSITS ON LARGER PURCHASES

Any business that does not collect payment upon delivery, is essentially
providing short term credit to their clients. If this is a problem for your small
business, or if your larger products are an expense you can’t afford to wait for
payment on, consider a new policy requiring a deposit upon ordering. This
means before your business has done anything, part of the expense is
already paid.
DON’T WAIT ON OVERDUE PAYMENTS

Often a company will follow up on an outstanding invoice, only to be told


payment is coming and it never arrives. When payment becomes an issue,
consider the relationship with the client, but also take into account that time is
money. This is income your company is owed, and that the client is expected
to pay. So, don’t wait too long to escalate this to your collection agency.
They’re the experts, they will know what to do and will help to ensure you
receive payment.

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