Working with big box retailers has its perks. They usually order in bulk, which means more money for your business. However, a few late payments and businesses start to feel the pinch. With so much merchandise tied up without payment, it can be hard for smaller businesses to maintain their cash flow.

Collecting accounts receivable can be uncomfortable on both ends and strain the relationship between companies. Collections processes involve a lot of nagging emails and voicemails, which can be an awkward hassle. Businesses should try to find the right balance between being annoying and being thorough, as well as being proactive about sending reminders and using the right tools to make the collections process a smooth one.

Businesses need to hit their payment targets, but they also don’t want to ruin relationships with major clients with bad collections interactions. In this article, you’ll learn some tips to help collect accounts receivable from big box stores to improve your cash flow and your bottom line.

How to collect accounts receivable from big box retailers

No company can survive without effective cash flow management. Businesses thrive on cash flow to pay their workers, third-party vendors, digital tools, and so much more. Companies get excited when a retail order comes in from a big box store because they typically stock up in large quantities. But they also have the ability to put your cash flow to a halt.

Without proper planning, an unpaid invoice from a brand-name retailer can tie up your finances. While many of these retailers are good about paying their bills, a small invoicing mistake can hold up your payment. The best way to protect your cash flow is to abide by the terms set by the order so that there is no issue when it comes to billing.

Here’s how to collect accounts receivable from big box retailers the right way:

Follow the terms of the purchase order

Start by reading the purchase order and filling it just like the retailer describes. Then have someone else double-check the order.

Ensure invoices are sent to the correct office/location

Big box stores often have several billing and receiving contacts for each department at various locations and even for specific vendors. This information is usually located on the purchase order, so be sure that your records match.

Be clear about net payment terms

Sometimes, big box stores will change the term dates according to when the merchandise was shipped or received, leaving smaller businesses to wait for payment. Ensure that your business reaches a net payment agreement of 10, 15, 30, or 60 days and stick to it.

Follow your client’s compliance guide

Big box retailers don’t often enter into vendor relationships without a long list of compliance rules for them to follow. If you want to work with them, you must play by their rules. Submit all invoices according to their EDI expectations if you want to get paid on time.

Don’t be afraid to follow up

If the due date has come and gone, don’t be intimidated to follow up. Big box retailers work with numerous vendors, and sometimes your invoice might be the one that falls through the cracks. Follow up with vendors about unpaid invoices, but don’t be aggressive or rude. You’re more likely to get moved to the top of the stack if you’re friendly and polite.

Whether you’ve worked with big box stores in the past or just entered into a new working relationship, hiccups are bound to happen along the way. These steps outline the general process of making accounts receivable run smoothly, but we all know that things don’t always go according to plan.

How to get on top of past-due accounts from big box stores

Each retailer your business works with will have different invoicing rules, contract agreements, and protocols for handling invoicing issues. Keep in mind that not every order will go as planned, and you will have to be flexible.

But what happens when you have a big account hanging in the balance or multiple accounts past due? 86% of CFOs say that more efficient AR practices can lead to significant cost savings, so it’s time to get organized.

Create an AR aging report

If you have one or more accounts in collections, then your first step to getting back on track is to create an AR aging report. Break down each account by invoices that are less than 30, 60, or 90 days late. This will help build an accurate view of the current status of all your accounts receivable.

Calculate your ART

Next, you’ll need to calculate your ART or your company’s accounts receivable turnover. This ratio represents the average number of times your business collects accounts receivable per year. The formula for ART is:

Net Annual Credit Sales ÷ [(Beginning Accounts Receivable + Ending Accounts Receivable) / 2)]

If your ratio is high, your business has a fairly efficient process for collecting accounts receivable. However, if your ratio is low, it can indicate that your accounts receivable processes aren’t working, and you need to assess your collection strategy.

Take action fast

When accounts are past due, it can be tempting to wait a few days to see if the payment shows up. But the truth is that the longer invoices go uncollected, the less likely they will be paid in full. Take action on past-due accounts as soon as they appear on your AR aging reports. Decide on a workflow that includes reaching out via several different channels at intervals, so your invoice doesn’t fall through the cracks.

Make it easy for retailers to pay you

82% of Americans use digital payments, and big box retailers are no different. If you want to get paid as fast as possible, then be sure that your accounts receivable department offers several payment options, including digital, direct, or EDI payments.

Small businesses that want to get on top of past-due accounts should also consider creating an incentive for early payments. A discount on an invoice if paid 7 days early might be just the nudge that a big box store needs to put your invoice at the top of the stack. Just because they have a lot of cash doesn’t mean they want to spend it.

Be proactive

Getting on top of past-due payments isn’t just about following up on overdue accounts. It is also a good time to become more proactive in collecting payments with all of your clients so that you maintain a steady cash flow throughout the year. Start the conversation about payment due dates and net terms before the first purchase order. Ensure that everyone is on the same page and each party understands how to fulfill their end of the deal.

Another way to be more proactive about collections is to send reminders as the due dates approach. Send out automatic payment reminders one week and then again a few days before the due date to help keep your clients informed about their upcoming payments.

Finally, the number one way to be proactive in collecting payments is to ensure that your invoices are clear, complete, and free of mistakes so that the big box retailers don’t need to push them out for further review.

Getting on top of past-due accounts will help your business keep more cash on hand to fulfill orders, perform daily operations, and thrive even in uncertain times. Accurate reporting and a sense of urgency will help your AR department get organized and be proactive in collecting unpaid accounts.

Boost cash flow with these accounts receivable tips

If you’re doing all the right things to collect on accounts receivable from your big box clients, but your company is still not seeing the cash flow you need to grow, your AR strategy still needs some fine-tuning.

Here are a few final tips to boost cash flow with accounts receivable:

Send invoices ASAP

Send out invoices as soon as purchase orders are fulfilled, so that big box stores have ample time to send in their payment. The sooner your invoice arrives, the sooner it will be paid.

Send regular due date reminders

Clients make mistakes sometimes, and they may miss their due dates. To avoid late payments, send regular due date reminders so that your customers are made aware that their payment is about to become due.

Evaluate credit risk appropriately

Most big box stores are in good standing, but you should always evaluate the credit risk of your clients before entering into a working relationship. The better a company’s credit score, the more likely they are to make its payments on time.

Be flexible but firm

In months with low sales, big box stores are likely to pay late due to a lack of cash flow. You can help reduce late payments by restructuring their payment plan from a net 30 to a net 60. Offer them flexibility, but be firm in your agreement.

Follow all standard billing procedures

One of the common reasons clients pay invoices late is if something is missing or incorrect on the invoice. Big box stores are known to kick back invoices that don’t meet their standards. Follow their standard billing procedures to the letter.

Use the right tools

Empower your AR and collections teams with the digital tools and tech stack they need to be as efficient as possible.

Lean into the data

Keep accurate accounts receivable records and generate regular reports. Pay attention to data trends and take action on data-based insights.

Focus on the customer experience

Focus on the customer experience throughout the collections process. Landing a deal with a big box store can be life-changing for your business, so be sure to remain courteous and respectful in all your interactions.

Final thoughts

When a huge order goes unpaid, it can hinder your company’s ability to move forward with business plans. Even businesses with steady sales come into times where accounts go unpaid for far too long, limiting cash flow and restricting growth. The good news is that there are many ways to get on top of overdue payments from big box retailers, even if your company is one of the little guys.

Managing accounts receivable more effectively starts before you send your first invoice. Be sure you understand the ins and outs of your partnership with a big box retailer and fulfill each purchase order and invoice according to their guidelines. But don’t let them put you on hold for too long. Act fast on overdue invoices, and for best results, create proactive workflows to start the payment conversation early on the cycle.