Looking to get rid of your Accounts Receivable? Most small business accountants I meet with think this is impossible. Think again! Effective accounts receivable management can get you paid for your hard work in a timely fashion.
Unfortunately, tax firms tend to run in SALY (same as last year) fashion. This leads to the old way of doing things, with little change in the industry. If you’re like most accounting professionals, perhaps you bill a 50% retainer or some sort of deposit when a client comes in for tax work. As you know, the client controls the workflow and we often find ourselves at their mercy waiting for complete and accurate information in order to prepare the return. (side note – wouldn’t you love to use that as an excuse on the 4868? “Dear IRS, I’d love to be able to file and get paid for my work and close this case, but my dear client is dragging their feet in getting me their information and what they have given me hardly constitutes complete and accurate information necessary to file the proper returns.” I digress.)
Accounts Receivable Management -Waiting on Clients
What does waiting on the client for information do to our cash flow? Flashback to my office in 2005, it meant jumping at the chance to finish a return when the client emailed their information at midnight the day before Labor Day, and voila, up all night working on a tax return so I could get paid the next day and pay my bills. In the meantime, I’ve picked up and put down the return 4 times, and used staff to work on the project during the 6 months we’ve had the file, and I don’t even WANT to know the realization on this project let alone think of the fact that we’ve now waited over 6 months to get paid for work we started in MARCH! Phew! For any of the non-accountants reading this blog, you now have a glimpse at the hamster wheel of running a tax business.
Accounts Receivable Management- Eliminating Accounts Receivable?
Now that we’ve exposed the ugly side of a tax business, let me reveal a spark of hope. I can tell you it IS possible to reduce your accounting expenses and eliminate your accounts receivable altogether! How do I know? I’ve done it and I’m working with Certified Tax Coaches all over the country doing it too.
The simple, yet effective secret I’ll share with you on this subject is: get yourself on automated billing, and get paid up front! That’s right, I said get paid up front. It is the only way to take control of the engagement and train the client to work on your terms. When the client pays up front, it doesn’t really matter when they bring in their completed information. No more late nights, no more holidays and weekends. When you are paid up front, clients are forced to work on the terms you set, period.
Automated Accounts Receivable Management
Certified Tax Coaches use tax maintenance packages to get paid year-round for tax and consulting work. We set clients up on monthly automated credit card billing. Most merchant banks provide a method for automated recurring billing. Quickbooks Merchant Services and Authorize.net are two that offer this capability.
You can reduce your expense even further by integrating your merchant account with your accounting software. One push of the button and all your deposits will instantly sync to your invoices and bank registers. This one step alone saved me $750 per month in accounting fees!
You may feel a little hesitation at the thought of getting a client to pay in advance for services. The secret lies in offering tax strategies and tax maintenance packages. When you specialize in tax strategies, clients and prospects are so attracted to the savings, they will do what it takes to keep more of what they earn. They will work proactively with you throughout the year. You are able to provide much better service, avoid the late night hours, and improve accounts receivable management.
Want to learn more about accounts receivable management? Become a Certified Tax Coach.