Retail: Billing & Accounts Receivable

Retail: Billing & Accounts Receivable

The retail industry has seen a boom in the use of credit cards over cash. On the accounts receivable side, this state of affairs has boosted revenues, pundits say, because a typical plastic purchase runs 12 to 18 percent higher than a money transaction.

On the other hand, time-lags between buying, billing and payment, as well as added fees and operational expenses, can choke a healthy cash flow - a problem particularly bothersome to small- and midsize- store owners. Credit cards aren't going away, but a number of technical and practical strategies can help entrepreneurs receive timely payment for goods and services.

Avoiding Credit Casualties

Keeping the accounts receivable column on track begins with a card swipe, continues through the billing process and winds up only when a payment clears and the money actually is yours. Fortunately, information regarding the subject abounds on the Internet. Some of the best, in fact, is available through the National Retail Federation, the Small Business Administration and a number of university-based business colleges.

From basic good sense to high-tech gadgetry, current revenue management tips and tools apply to retail operations of every size and type, even small, independent retail operations. Here are a few basics:

  • Be tech-timely. A point-of-sale system goes a long way toward getting the accounts receivable ball rolling. By maximizing the amount of data inputted with each sales transaction, a solid POS set-up provides all the raw material for tracking, billing and follow-up of customer accounts. Better systems typically include ongoing support services, including repairs and overhauls. Industry analysts suggest upgrading terminals at least every three years.
  • Ensure that all people-systems are "go." If the accounts receivable column is suffering, sometimes the person pushing the keys is at fault. For instance, when transaction numbers don't seem to jibe, running either too low or too high for expected sales patterns, an employee may be processing credit cards, debit cards - or even cash sales - incorrectly. A hardware/software training session or two may be all it takes to rectify the situation. Again, POS vendors often provide instructional services to customers as part of their support package.
  • Review, review, review. Going over monthly statements and financial reports with a fine-tooth comb - and understanding them to the final fee and decimal point - is an absolute fundamental of the entire billing and accounts-receivable continuum. By doing this faithfully, a store owner, especially one that does his own bookkeeping, may well identify inconsistencies that are hurting the bottom line. By the same token, the company or bank that handles a retailer's receivables has a professional obligation to assist with all matters regarding that account.
  • Stick to a collection protocol. A dependable cash flow keeps the coffer full. This may mean dealing firmly, but professionally, with customers slow to come up with their credit card or installment payments. NEVER ignore overdue payments. When receivables pass the 30-day due date, rebilling should follow within 24 hours. Sixty days from the initial invoicing, an employee can contact the customer, in a friendly, impartial manner, by telephone. After 70 days, the retailer should call personally to ascertain the problem, taking care to gather information through concerned, even-tempered questions. A collection agency should enter the picture only when the owner is certain he won't get his money any other way.

A Word On Checks And Balances

Much like credit cards, written checks truly can cut off cash flow, mostly because it takes time for them to process and clear. Happily, technology has spawned a number of payment systems designed to help business owners maintain a positive balance:

  • Online checking. Internet store retailers can access and process electronic payments directly from the website. Fund transfer to the owner's account takes under 48 hours - significantly less time than paper transactions.
  • Telephone. Particularly suited to mail order services, customers authorize "checks" to cover purchases via the phone line, with monies deposited into the retailer's accounts within two days. This system is much cheaper than credit card processing, because costly transaction fees are not a factor.
  • Accounts receivable check conversion. ARC, available through a number of leading financial service providers, allows customers to leave paper checks in a drop box or lockbox. The hard copies are converted into electronic debits, then processed through the ACH (Automated Clearing House) network. Any checks drawn on consumer accounts payable in U.S. dollars are appropriate for ARC conversion.

    Here's how the technology works: A machine reads the check to obtain the magnetic ink character recognition (MICR) information, such as serial and routing numbers, inscribed along the check's lower edge. This data, along with the check account transmits in the form of an ACH record to the ARC provider. In turn, the provider initiates a transaction and credits the retailer's account in the next business day.

  • Electronic check recovery. A boon to retailers who see too many bad checks, this process allows the owner's bank to forward the returned check to the service provider's processing center. The check goes into a data base, where it is resubmitted via the ACH network. The benefit? Electronic recovery allows retailers to tend to their customers, rather than track bounced checks.