How to Implement an Effective Credit Control Strategy for Accounts Receivable 

Managing accounts receivable in real estate bookkeeping is crucial to maintaining a healthy cash flow and reducing the risk of unpaid debts. Accounts receivable refers to the money owed to your business by tenants or clients for services you’ve already provided, such as rent or property management. Ensuring that this money is collected on time allows your real estate business to operate smoothly without running into financial challenges. Implementing an effective credit control strategy is essential for managing these payments, keeping track of who owes you money, and ensuring that payments are made on time.

Best Practices for Implementing a Credit Control Strategy

1. Set Clear Credit Policies:

• To avoid confusion and disputes, it’s important to set clear credit policies. These policies should define payment terms, such as when payments are due, any credit limits, and the consequences of late payments. 
• Make sure that these policies are communicated clearly to tenants and clients so they know what to expect.

2. Conduct Credit Checks 

• Before extending credit or renting property to new clients or tenants, perform a credit check to assess their ability to pay. 
• This can help you avoid potential risks and set appropriate credit limits for each client based on their financial history.

3. Use Electronic Billing and Online Payments 

• Implementing electronic billing and offering online payment options makes it easier for tenants and clients to pay on time. 
• Not only does this speed up the process, but it also reduces the likelihood of delayed payments, as invoices can be sent and paid quickly through digital platforms.

4. Monitor Accounts Receivable Regularly 

• Keeping an eye on your accounts receivable is essential for identifying overdue accounts before they become a bigger problem. 
• Reviewing aging reports, which show how long debts have been outstanding, allows you to follow up promptly with tenants or clients who may have forgotten to pay.

5. Offer Early Payment Discounts

•  Incentivize early payments by offering a small discount for clients who pay ahead of the due date. 
• This not only encourages timely payments but also helps improve your cash flow by getting money into your business sooner.

6. Automate Reminders and Invoices 

• Automation tools can save time and effort when managing accounts receivable. By automatically sending reminders and invoices, you can ensure that tenants and clients are reminded to make their payments on time, reducing the chance of missed or late payments.

7. Train Staff on Credit Control Procedures 

• Your team should be well-versed in your credit control strategy. By training staff on how to handle accounts receivable efficiently, including sending reminders and managing overdue accounts, you’ll ensure that the process runs smoothly.

8. Establish a Collections Process 

• When payments are overdue, having a collections process in place can help recover the funds. This process might involve sending formal collection letters, making phone calls, or negotiating payment plans with the tenant or client.

9. Review and Adjust Credit Limits

•  It’s essential to regularly review credit limits for your tenants and clients. If a client has shown reliable payment history, you might increase their credit limit. 
• However, if they have been late or missed payments, it might be wise to lower their credit limit to manage the risk better.

10. Foster Collaboration Between Departments 

• Ensure that the finance, sales, and customer service teams work together in managing accounts receivable. This collaboration leads to a more unified approach, especially when communicating with tenants and clients about payments.

Conclusion:

A well-organized credit control strategy is key to managing accounts receivable in real estate. It helps in ensuring timely payments, reducing risks, and maintaining the financial health of the business. By implementing the best practices mentioned, your real estate business can streamline its payment collection process and avoid cash flow issues.

Meru Accounting can help you with effective accounts receivable management, offering professional bookkeeping services that ensure your business stays on top of its finances while focusing on growth.