Inefficiencies in your accounts receivable functions can dramatically impact your business.
“If a company is not managing its accounts receivables, it faces a greater risk of not collecting the money on a timely basis or, even worse, not being able to collect on the funds at all,” says Nick Heintzman, staff accountant at Ashton Staffing, Inc.
Managing your accounts receivable can be one of the most time-intensive duties your company faces, but it is also one of the most important functions
“It lays the groundwork for solid financial footing,” he says.
Smart Business spoke with Heintzman about how companies can better manage their AR to ensure fiscal stability.
How much control can a company really have over its AR?
A company has as much control over its accounts receivable as it can devote to it. The accounts receivable process is more than just managing the account once it is established. The process should start before the client ever begins doing business with you. A credit check should be run so you can evaluate the financial history of a prospective client to better protect you from losing money on the back end. If you notice a trend of late payments, you are better prepared to negotiate terms with the client that will help you still be profitable in the event that you are paid late. A credit report will show bankruptcies and liens, which could help you avoid getting tangled up with a client that would be more likely to fail and leave you with pennies on the dollar.
Another important part of evaluating a credit report is to set credit limits for prospective clients. This will help to protect you and also let the client know it will have to keep up with payments in order to maintain the relationship.
What are some of the more common problems companies face regarding AR?
Three problems that seem to be the most common are short-pays, payment beyond terms and companies failing to pay because of economic difficulties. All three can become significant difficulties in a very short time.
If a client is short-paying invoices, you are not capturing your full earning potential on the account. A client paying beyond terms will hinder your cash flow and potentially cause you to have to borrow to keep up with your financial responsibilities. And if you never receive payment from a client, you have not only lost the money associated with providing the goods or service, you also have lost the profit potential associated with the sale.
What technologies exist today that can help improve a company’s AR function?
There are several accounting software packages that make managing your accounts receivable much easier. QuickBooks, for example, creates reports that will break down your accounts receivable, in detail if needed, by preset time intervals. It can quickly show you which accounts are beyond terms, and this will help you focus on delinquent accounts on the days when you don’t have a lot of time to allocate to managing your accounts receivable.
QuickBooks also can apply finance charges to delinquent accounts, which helps to offset the cost associated with payment beyond terms. Many times, applying late fees will cause a client to re-evaluate its payment terms for you because paying late fees often is a burden. If a client knows you are serious about staying on top of its account, it is likely to get back in terms to avoid the extra charges.
Overall, what are the key factors to efficient AR management?
Some key factors are to keep up with it daily, be friendly but forceful, follow up in a timely and consistent manner, and do the research before taking on a client. However, being rude toward a client will not get payment any faster and will most likely cause the client to think twice about doing business with you. By being friendly and personable, you can help establish a relationship with the client, and that can go a long way in ensuring you are paid on time.
How can inefficiencies in the AR function, if ignored, affect a business?
The longer an account goes outstanding, the lower your success rate of collecting on the funds. In both scenarios — collecting the money late or not at all — it is going to restrict your cash flow for expenditures. Most accounts are set up on a net-30 term, whether it is accounts receivable or accounts payable. If you are collecting your money at the 45-day mark, it’s because you are not staying on top of your customers and you will most likely end up paying most of your vendors at 45-plus days, beyond terms. This can create conflict between you and your vendor, straining the relationship or even causing the vendor to require payment up front. Going one step further, if companies report to credit bureaus, your credit rating will drop if you are consistently late on payments. Poor credit ratings lead to higher interest rates for borrowing, which costs the company more money and restricts cash flow even further.
How should a business go about getting its AR functions back on track?
Set aside time every day to focus on it. If you devote some time every day to contacting aging accounts, you will:
- Stay at the top of their minds, which will hopefully lead to faster payments;
- Know which accounts you will need to keep a closer eye on by seeing ongoing trends; and
- Be able to catch delinquent accounts right away before they spiral out of control.
Nick Heintzman is a staff accountant at Ashton Staffing, Inc. Reach him at (678) 359-3783 or email@example.com.
Insights Staffing is brought to you by Ashton
It has been three years since the recession was officially declared to have ended in mid-2009. However, even with that declaration, the national unemployment rate remains at more than 8 percent and full-time hiring is sluggish at best. There has been an increase in hiring during the years since 2010, but it has not been enough to replace all the jobs lost during the downturn.
“There is so much uncertainty surrounding such things as the cost of health care, taxes, foreign markets and the availability of capital, which has left many companies afraid to make full-time offers of employment,” says Melissa Hulsey, president and CEO of The Ashton Group. “The cost savings and increased flexibility offered by a contingent work force make this a silver lining in this economy.”
Smart Business spoke with Hulsey about using temporary employees to keep up production until market conditions stabilize.
What are some trends you’re seeing in the marketplace?
Small businesses — those with fewer than 50 employees — are reporting more growth and confidence than their larger competitors, and there has been a rise in salaries as recruiting and retaining skilled talent has become more competitive. However, the other side of the coin is voluntary turnover has risen as talented employees leave their jobs to look for better opportunities in the marketplace.
Additionally, because of the prevailing uncertainty in the economy, over the past several years there has been a steady rise in the use of contingent labor that is far outpacing full-time opportunities during the same time period. Historically this has been a leading indictor that full-time jobs also will increase in the future in as few as three to six months. However, that has not been the case recently. This new trend suggests that employers need additional labor to meet production demand but are not willing to make a long-term commitment to employees. Also the ratio of Americans actually working compared with those available to work recently has hit its lowest level since 1981.
How can contingent or temporary workers help companies keep up with production?
The use of a contingent work force allows production demands to be met without any strings attached. For example, all of the burdens associated with the hiring process, such as screening, initial interviews, payroll expenses, taxes, insurance and unemployment are the responsibility of the staffing firm. For the employer, it means a job can be filled quickly and efficiently to align its work force with its production needs.
How can staffing companies help an employer reduce its time-to-hire?
Staffing companies are in the business of placing candidates into jobs, so they are constantly recruiting and screening new applicants. In addition, most staffing firms have well-qualified individuals who they have worked with previously who can be available for new assignments. By having a pool of candidates who are pre-screened and ready for work it can significantly reduce the time it takes to have a position filled.
What cost savings can be realized by utilizing contingent or temporary workers?
On average, it costs $7,000 to hire and train one new employee. Many upfront costs such as recruiting, advertising, screening applicants, verifying credentials and initial interviews can be eliminated by utilizing contingent labor. In the long run, savings on health insurance, retirement and PTO can result in significant savings over hiring full-time workers using in-house resources. In addition, temporary labor can ebb and flow with production demands, further increasing savings and avoiding the blow to morale caused by laying off full-time employees when production has to be tapered off.
How much training should a company expect to put into a temporary or contingent worker?
When companies hire contingent workers, they need to train them for the job at hand. To make the most of the cost and time savings temporary labor offers, companies should streamline the training process for these individuals by defining exactly what they want their contingent staff to accomplish during a shift and train them with that end result in mind. Other than training for the specific job, address housekeeping issues with all temporary employees on the first day. Information on items such as parking, use and upkeep of the break rooms and bathrooms, and even where they can grab a bite to eat close by will not only make the new person more feel comfortable but save time as well.
How can a company ensure it’s getting the right worker for the job?
There are several key steps to ensure a temporary employee is a good fit with your company. The first is to choose the right staffing partner to work with. Choose a service provider that understands the needs of your organization, as well as one that makes it easy to establish an ongoing dialogue. The next step is to clearly define what you want to accomplish.
From there, a job description and position requirements can be written. The more detail you provide to the agency, the better its ability to qualify the best candidates for the opening. Job descriptions for your full-time positions also can serve as an excellent guide for your ‘part-time’ jobs.
Melissa Hulsey is president and CEO of The Ashton Group. Reach her at (770) 419-1776 or firstname.lastname@example.org.
Insights Staffing is brought to you by Ashton
Weakness in the job market may well be followed by an increase in the number of cases of resume fraud. Unemployed people are feeling the pressure, and while they likely won’t be fined or jailed for lying on their resumes, that’s no reason to avoid telling the truth. MJ Helms, director of operations for The Ashton Group, says that in most cases, human resource departments should be doing background checks and comparing people’s social media accounts to their resumes.
“Apart from being morally and ethically wrong, lying on a resume can lead to problems for the company that hires this person, and everyone loses,” Helms says.
Smart Business spoke with Helms about how to make sure you don’t recruit someone with fake credentials.
How can employers be sure resumes are accurate?
The information that job candidates most often falsify on their resumes are employment history, skills, education records and salary details. To check the validity of their claims, conduct an initial phone screening with candidates that you as a hiring manager or human resources representative are interested in pursuing. This will save the time you would otherwise spend bringing in people who have not been properly qualified for face-to-face interviews.
What should employers look for if they suspect a resume is falsified?
Recruiters receive many unqualified candidates who apply for positions through Internet job postings. When submitting an application through these avenues, candidates generally omit or falsify information they believe will turn off potential employers, such as positions they held for a very short period of time and being fired. Recruiters and hiring managers should watch for:
? Unexplained gaps in employment
? A reluctance to explain the reason for leaving a job
? Unusual periods of self-employment
Always corroborate the above information by calling references, including clients they had during self-employment periods. Be aware that candidates falsifying this information might provide fraudulent references. Always check the websites of previous employers and use the phone numbers found online for employment verification.
How can you screen candidates’ job experience?
A person submitting a false resume knows that companies and recruiter agencies search for candidates through online job boards using keywords. They also know that to end up in the top two to three pages, they need to match as many keywords as possible, so they add skills to their resumes that are commonly searched for by companies, whether they possess the skill or not. Ask candidates to send updated resume with details for their listed skills, specifying whether they’ve applied the skill on the job or just had a training course. If they have undergone training, find out where that was undertaken and for how long.
If they have hands-on experience, find out when it was obtained and when it was that they last applied it in a work environment. Asking these questions forces them to cut down their list to only those skills with which they are most comfortable. Now they know you’re serious about qualifying them. If you are recruiting for a technical position and they’ve listed skills or experience you’re unclear about, have someone within your company who has these skills conduct the initial technical phone screening.
How can you verify a candidate’s education?
Some candidates might exaggerate their educational history. To screen them, contact the college or university on the resume to verify a degree was granted. Applicants might list a completed degree when they did not finish all courses and graduation requirements. If a college name is unfamiliar, check the website of the school, verify its accreditation and evaluate the nature of the school.
Diploma mills — institutions of higher education operating without the guidance or supervision of a state agency and/or professional association that grant fraudulent diplomas — abound online. There are more than 400 diploma mills in operation, with another 300 websites offering counterfeit diplomas.
What types of candidates are most likely to exaggerate on their resumes?
Faking and embellishment are both commonly found on resumes, especially on those of salespeople. Candidates in this field tend to add their fixed salaries, their sales-based incentives including potential incentives that would have been theoretically paid to them if they had met some highly improbable sales goals and wrap these up into their ‘current salary. Some companies ask to see the last pay stub or W2 form om sales candidates to verify their claims. However, it may be illegal to ask, so check with your state labor department. Make sure you ask someone if his or her annual salary includes a bonus. If it does, look for the amount or percentage of salary and find out whether it is based on individual or company goals.
How can employers be sure candidates worked where they say they had?
Watch for companies with buzzwords such as Tech, Info and Infocom in their names, as these can be fictitious. If you have never heard of the company, check the Registrar of Companies online to see if it is actually registered. At the interview, ask specific questions about which office they worked in, the address, how many people work in that company and the name and phone number of the immediate manager. If a company employs more than 100 people and they give the name of the CEO for everything, look into it further.
Remember that mistakes and misunderstandings do happen. If you find a discrepancy, give the candidate an opportunity to explain. Use common sense and trust your intuition and experience. If something doesn’t seem right, follow up on it.
MJ Helms is director of operations for The Ashton Group. Reach her at email@example.com.
Insights Staffing is brought to you by Ashton