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Receivables – What Are They and Why They Matter (1 of 2 for Office Managers)

This is Part Four in our seven-part series on business reports for Lawn Care, Landscaping, and Tree Care companies. This is the first of two posts for those who work as office managers or other administrative staff. This post will discuss accounts receivable, or simply “receivables.” We’ll explain what they are, why they matter to the business, and how you can ensure you’ve got things running correctly. 

Why is Managing Cash Flow Significant? 

According to Harvard Business School Online, “Cash flow refers to the net balance of cash moving into and out of a business at a specific point in time.” So, any time money enters or leaves the business, that’s your cash flow. Monitoring this cash flow in and out of the business is one of the most essential roles in any company. 

Cash flow is critical for the success of the business. If there’s no money in the accounts, the company can’t pay back the vendors and contractors from which it has purchased goods and services. You can’t pay rent, buy fertilizer, or fill your trucks with gas without cash in the accounts. 

Payroll is also one of those items that you must consider. Without enough money in the bank, people won’t get paid. Then, it won’t matter how many sales you’ve made or how much your employees love working for you. Your company is sunk. 

Eventually, your company would also like to invest some money. They need to buy new equipment, software to help spark growth, or hire a key position. Having enough money to make these things happen is all down to cash flow. 

So What are “Receivables?”

“Accounts Receivable” or “receivables” is the accounting method used by most Lawn Care and Landscaping companies (and a few Tree Care companies). According to The Hartford, “Accounts receivable is the balance of owed money when a business sells goods or services to a customer on credit.”

In most Green Industry companies, the process looks like this: 

  • Someone calls in to get a quote on work
  • You give them a quote
  • They sign it and send it back
  • You schedule the work
  • Your team completes the work
  • THEN you send them an invoice

Sounds familiar, right? Keeping track of those outstanding invoices, of who owes you what, is critical. Said differently, you need to track how much each individual customer owes you. 

Usually, people you owe will let you know, right? (By the way, this is called “accounts payable” in accounting lingo.) Your landlord will tell you if you owe rent on your facilities and you’re late. If you owe your chemical vendor for fertilizer or the bank for the equipment you just financed, they’ll tell you. 

The difference between your “payables” and “receivables” is basically your profit. That makes knowing (and collecting!) all your receivables critically important. After you’ve met your debt obligations (all your payables are accounted for), you’re eating into your profit every time you “write off” a bill. 

When a business fails, it’s often because it has poorly managed its receivables. 

Getting Paid – How to Collect Receivables

It’s uncomfortable to call and ask people for money. No one likes to do it, especially in service businesses where the relationship between customer and provider is critically important. 

But getting paid on time is also critically important. Setting up your business processes to ensure successful monitoring and collecting of receivables is crucial to your success. Here are some ways you can do that. 

Create an Internal Process for Billing Receivables

I genuinely believe that most people want to pay their bills. I also believe that people in our society are more distracted than ever. Leaving it up to them and saying, “I know they’ll pay up when they remember,” is a recipe for disaster. (Incidentally, it’s also a great way to destroy those relationships you’ve worked hard to build.)

You must create a formal process around collecting your accounts receivable (or “AR”). Figure out the most logical workflow for how you do business. Be sure to structure it around your terms (net 15 or 30 days for residential work or net 60 for commercial are pretty standard). This keeps your receivables collection on track.

Your CRM or business management software may have tools built-in to help with this process. Explore if those options are available; it will likely save you a LOT of time and stress. Also, it’s a good idea for your Sales team to discuss terms at the time of sale. 

Once you’ve got all the steps outlined, document this process. Create a step-by-step, written guide for what happens and when. Creating a visual representation of this process is also a good idea. Try making a flowchart or an actual map that explains step-by-step how receivables are monitored, contacted for payment, and what to do when they fail to pay. This ensures everyone responsible for AR knows what to do and when. 

Lastly, documenting the process in this way ensures that you can scale your office staff more effectively. It’s much easier to help onboard a new office member to help with this process when the steps are spelled out plainly. 

Send Invoices Promptly 

The longer you wait to send invoices, the longer you’ll wait to get paid. And this makes sense; if people don’t know exactly what they owe you, they will not pay you. Few people use checks anymore, and those that do aren’t going to send you a blank one. 

As a general rule, there’s a relationship between invoicing and payment; the faster you get the invoice to the customer, the faster you’ll get it paid. If your business management software allows you to send invoices once work is completed, make sure you incorporate that into your process; it’ll remove some of the manual work and get you paid more quickly. Even better if that software has automation that will remind the customer their payment is due. 

You might consider sending a paper invoice as well. For customers who are nearly delinquent, consider sending a paper invoice about seven to ten days before payment is due. This is a gentle reminder that they owe you money and can’t say they “didn’t get the invoice.” You clearly know where they live since you completed service at their address.

Some research suggests that the language on your invoices matters, too. Invoices that had “14 days” in the terms received payments more quickly (over 65% in under 14 days, over 82% in under 30 days) versus 30-day terms (only 72% paid in under 30 days). That same study showed that being polite helps – invoices with “Thank you” in their terms also got paid slightly more quickly than those with “Interest.” 

Make It Easy For People To Pay You

It’s 2022 I’m writing this, so I shouldn’t have to say this, but I will – have some way for people to pay you digitally. I’ve written about this before (you can check out that article here). Whether it’s credit card processing or you accept ACH payments, create a way for people to pay you without being required to write you a check or pay in cash. 

There are a lot of reasons for this. It will save you time reconciling your books. Being easy to do business with is a great way to build referrals for your business. It also contributes to a fantastic customer experience, boosting your sales.

If you don’t have a way for people to quickly pay you, please get one for your own sake. 

Document Everything When It Comes to Your Receivables

We’ve all been there: that customer is three weeks late paying you, swears they never saw the invoice, and “didn’t know” their service was completed. You send them a new invoice which they pay five weeks later.

Is that person chronically late? Are they getting away with it because they talk to a different person each time? Even with a single office staffer, is that person empowered to “fire” a client that’s consistently and negatively impacting your cash flow?

Weed out customers who aren’t a good fit (i.e., don’t pay) by documenting everything. Document every phone call, email, and physical invoice you send to resolve an AR issue. This should be part of your internal process for managing AR issues. 

I occasionally found myself in the middle of AR issues. I’m no bookkeeper, but I’m good with people. I developed the habit of checking the account to see if it was overdue. If it was, a gentle “Hey, Mr. Smith, I’m not sure you realized this, but your account is past due. Would you like me to transfer you to someone who can take that payment from you?” usually paid off. 

You either learn there’s an issue with the service you didn’t know about, allowing you to resolve it, or you make them aware, and they usually paid the bill. Few customers got squirrelly about a bill. 

I noted the account, whether it was a phone conversation or an email exchange. If you’ve got multiple staff in the office (or you, the office manager, take a vacation), those notes are crucial to delivering good customer service and keeping cash flow consistent. 

Only a handful of times in my career have I seen something escalate into a legal proceeding. When it did, those notes were a lifesaver for the business. 

Receipts and Reconciling Your Books

You’d never go to the appliance store, buy a new fridge, stove, and dishwasher, and walk out without your receipt. That’s become the standard for all retail transactions, but for some reason, there are still service providers who ignore this. 

It might sound basic, but once someone pays you, they should be provided with a receipt. I had an experience where I worked with a landscaper last year (2021), and I had to ask for a receipt. It blew my mind.

Receipts are the most BASIC form of communication you can provide your customer. We’re talking about the absolute, bare minimum expectation from you. Make sure you meet that, or you’ll really struggle to get new customers through referrals. 

Additionally, once you’ve provided a receipt, you’ll know that invoice has been paid. You move that money from your “receivables” list to your cash account and make sure you document the account. That’s right – it’s important to document not only collection efforts but EVERY PART OF THE ACCOUNTS RECEIVABLE PROCESS. (I recommend documenting every single time you talk to a customer, but that’s a blog for another day.)

Cut Off People Who Aren’t Paying

Here’s another all-too-common scenario: someone owes you money (let’s say for shrub trimming), and they’re three weeks late on a payment. In the meantime, you’ve continued to do their weekly mowing and even put down a treatment (or two!) of their lawn fertilization and weed control program. Now they’re not paying for any of it, and you have to write off those invoices as bad debt. 

Sound familiar? This is another critical reason to stay on top of your AR issues. Tracking this weekly and cutting off services for people who are late in paying prevents loss. 

When this happens, they’re essentially stealing from you, so think of your AR process as the “loss prevention officer” that patrols the department store looking for shoplifters. They have a similar function when used in this way. 

Create some guidelines for your staff to have on hand around when to “fire” these types of clients. For most customers, especially new customers, you’ll probably want to give them grace the first time they have this issue and probably even the second. 

Eventually, their late payments will begin to impact your ability to meet the business’s financial obligations. Determine what that threshold is for your business, and create the process for parting ways with a crappy customer around that. 

Knowing who is paying promptly allows you to keep great customers and cut off the ones that drag down your cash flow. 

Some Exceptions to Consider

Sometimes, someone pays late habitually, but they have a legitimate, valid reason for doing it. 

I’ve had several customers over the years that got their Social Security checks or pension checks once a month. Rather than a bi-weekly check, they got lump sums monthly. If you have net 30 terms and provide that service late in the month (29th or 30th, for example), they may take until the beginning of the following month to pay. So, if that service was rendered on April 28th, you may not get paid until the first week of June. That’s when they can make it work, and they’re almost always good for it, but they only get paid on a particular timeline. 

The same goes for many Sales professionals. Many get their commission checks monthly. I even had a customer who sold executive jets and worked 100% on commission; he might only get paid once or twice a year

If these people pay late habitually, it might be worth asking them if those net 30 terms work for them. If not, would they consider pre-paying for a discounted price to cover the whole season? They save money, and you get guaranteed income. Everyone wins. 

Lastly, some people “communicate” with their wallets. If they’re dissatisfied with how a job was completed, they may refuse to pay until you call. Asking, “Were you satisfied with the work we did?” is a great way to bring their guard down and frame the call as a customer service follow-up rather than a collections call. You may find something easily fixed is all that’s required, and they’ll pay quickly after you’ve resolved the issue. 


We’ve unpacked a lot in this post. Here’s a quick recap: 

  • Create and document an internal process for how to resolve AR issues. 
  • Send invoices promptly for the best results. 
  • Make it easy for people to pay you. 
  • Document everything when you’re talking to a customer about money. 
  • Cut off customers that drag down your cash flow, with a few minor exceptions. 

Follow these practices, and you should help keep your business’s cash flow incredibly stable!

Go back and read Part 3 in this series – Know WHAT You’re Selling (2 of 2 for Owners)

Keep reading Part 5 in this series – Timesheets Give You Critical Insights (2 of 2 for Office Managers)

Download the FREE guide: Reporting Basics for Landscaping and Tree Care Companies

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