Year-end techniques for accountants collecting on outstanding client accounts

Ideally, every service an accounting professional bills for would get paid, on time, every single time. Of course, we don’t live in a perfect world.

Two people are standing next to each other, looking at an open folder.

Q4 is typically the time when firms start considering their end-of-the-year finances and how they can:

  1. Maximize profits before the year is out, and 

  2. Reduce the impact of bad debt sitting on their books.

This checklist will provide you with some techniques to help you work through your receivables and, ideally, collect on those outstanding accounts—perhaps even those that you’ve all but given up on.

Assess the situation

Create a strategy

Every client is different. As such, you cannot simply employ a one-size-fits-all strategy to get your invoices paid. Some will need certain communication strategies, angles and tact. This can make all the difference.

Categorize your unpaid invoices

Break up the invoices into manageable categories based on the firm size, the amount, or age of the outstanding balance. If your firm uses a practice management tool, this could save you a lot of time creating this list. These tools often let you export a list with all of the information listed above. 

Create a list

Consolidate all the information for your outstanding accounts into one place, including information like:

  • Client name 

  • Amount of unpaid invoice

  • Age of balance

  • Last payment received

If your team is helping with this effort, consider using a spreadsheet and color coding or labeling each client to coordinate with the team member assigned to them.

If you use a tool like Karbon, you can collaborate as a team directly in a client’s contact record instead. Or you could create a Karbon work item for each client you’re chasing that will house your internal and external communications and efforts.

Prioritize your aged receivables

Tackle balances from youngest to oldest

Sort your list between two categories:

  1.  Young receivables (<120 days old)

  2. Aged receivables (>120 days old) 

As a general rule, you have a much better chance to collect the complete balance on a younger invoice than an aged one.

Email clients with outstanding balances

Create an email template to send your clients reminding them of the outstanding balance and requesting payment. To ensure this email is as effective as possible, it should come from the professional who worked on (or is still working on) the client’s account. Karbon’s automated Client Requests and Client Portal can come in handy here.

Consider offering a discount to clear the remaining debt

Hear me out. If your client owes you $10,000, consider asking that they pay $5,000 instead. While this may seem like a rather large discount to offer, remember that at one point, you were ready to cut your losses on this client.

Embrace modern technology

Create an easy and streamlined payment process

By using an online payment solution, you can expand your payment options to accommodate a variety of billing situations, including automating your payments to help prevent late payments altogether. 

Offer flexible, online payment options

Cash and check payments have become less common in favor of using credit cards and other forms of electronic payments. According to recent research, about 84% of consumers prefer to pay by credit card or debit card.

Digitize invoices

Giving your client an easy and fast method to pay this outstanding balance is an excellent way to encourage payment. In fact, at CPACharge, we’ve found that as much as 62% of bills that are sent electronically are paid within 24 hours. 

Put best practices in place for next year

Set clear expectations upfront 

Create a roadmap toclearly explain your firm’s expectations when it comes to payment and how much the engagement will cost your client. You’ll want to determine if the client is able to afford your firm’s services, and how they intend to pay in the first place. All of this information should be included in your fee agreement.

Send invoices out on time

Consistency is key when it comes to billing. That's why you should aim to bill your clients on the same day of each month.

Follow up on unpaid invoices in a timely manner

Rather than let bills go unpaid for months, try to get into the habit of following up with these clients sooner. We recommend setting the time on your calendar to check the payment status of your bills about a week after they are sent.

Automate your payments

This is one of the advantages an online payment solution can bring to your firm. Have your client provide their payment data, and you both can determine when this payment data will be charged. This will save you both time and effort, and ensure your firm never has to worry about late payments.

Proactivity is key to getting paid

Your firm already has enough pressure wrapping up the end of a fiscal year. Throwing aged receivables on top of this can feel daunting, and can often lead to you wanting to wash their hands of it rather than handle it.

However, by implementing these techniques, you’ll be better placed to turn a write-off into substantial revenue.

Learn more in our ebook, Closing on Strong Financial Footing, or learn more about CPACharge.