How to Motivate Account Executives to Own Accounts Receivables

Outstanding accounts receivables are costing you money. Every day you don’t collect, you are giving clients an interest-free loan. That’s money you could be using to invest in your business and grow your bottom-line profits. 

The problem is that most businesses miss a critical step when they put together their accounts receivable process. They assign in-house staff and collections agents to work the outstanding balances. There’s a simple solution to closing the gap between delivery and payment: motivate Account Executives to own their accounts. 

The Downside of Excessive Accounts Receivable

Failing to collect on overdue accounts can tank an otherwise promising business. Aside from the fact that you are giving clients an interest-free loan, your accounts receivables cost you in other ways. 

These are the biggest drawbacks of an ineffective accounts receivable management process: 

• The collections process tends to insert a sour note into customer relationships. When receivables go bad, you are likely to lose the client - and any referrals that client might have sent your way. 

• Chasing overdue accounts is costly - and not just because you haven’t been paid. It takes time to make calls and send collections notices. That’s time your team members could be spending on other, more profitable tasks. 

• While you are waiting for your bill to be paid, you have to run your business - and that requires cash. Often that means tapping into credit lines, which means you pay interest and fees. 

The key is to rethink your recruiting and staffing model. When you hire representatives, ensure they are ready to be directly involved with getting invoices paid.

Invoicing and Accounts Receivable Habits to Break 

If your business is like most, this is what your sales process looks like: 

• Account Executives meet with prospective clients and sell them on the benefits of your services. 

• They negotiate pricing with little or no emphasis on payment terms. The idea is to close the sale, and that means downplaying the sticky part of the contract. 

• They get a signature, then they hand the account over to support staff for further handling. 

• While representatives might check in with clients to keep the relationship warm, other team members are managing the logistics of delivering services in the agreed-upon timeframe. 

• Commissions are paid, and account executives move on to the next potential deal. 

• An invoice goes out from the accounts receivable office. 

• No payment received. 

• A reminder notice goes out.

• No payment received. 

• The individual or team dedicated to collections makes a series of increasingly firm attempts to get the invoice paid. This process leaves clients angry, frustrated, or embarrassed. 

• Maybe the invoice is eventually paid, maybe not. In either case, the client chooses your competition for their next purchase.

The only winners in this all-too-common scenario are the sales representatives. They have done their jobs, and they have been paid for their work - but somehow your business ends up losing out. 

Motivating Representatives to Own Accounts Receivable

As you work through the recruiting and staffing process, set expectations with your account executives from the start: The deal isn’t closed until the invoice is paid. That means commissions are tied directly to clearing accounts receivables. 

Of course, you don’t want to discourage candidates during the staffing process, so it is important to temper this message with training and support. 

These best practices will ensure a win/win relationship: 

• Train account executives to double- and triple-check billing information. There is no chance of being paid promptly if the bill goes to the wrong person or the wrong place. 

• Consider early-payment discounts - for example, many companies find success with a two or three percent drop in price if payment is made in 10 days or less. When positioned correctly, account executives can often turn this into an effective selling point. 

• Set up firm late payment penalties, and ensure account executives discuss these with clients when the contract is signed. This is not an area where your clients will appreciate surprises. 

• Ensure you have a defined process for extending credit, and stand firm when a client doesn’t qualify. 

• Create a billing process that gets invoices into clients’ hands promptly. Your account executives will thank you for ensuring there are no administrative delays.

Linking commissions to the collection of accounts receivables isn’t a particularly common practice, but it isn’t so usual that it will turn prospective account executives off. You can get their buy-in if you set expectations properly during the hiring process, then offer on-going support as they work to close deals and collect payment. 

Keep in mind that limiting the expenses associated with outstanding accounts receivables means you save money. You can attract and retain top talent by investing some of that savings in your compensation strategy. Higher-than-average pay often encourages higher-than-average performance.

Don’t settle for losing money to overdue accounts. Get your whole team involved in settling receivables with this core principle: The deal isn’t closed until the invoice is paid. Learn more about how AdminAssist can help to simplify and streamline your company’s accounting by visiting us online.