6 Tips to Improve your Accounts Receivable Process

Tips to Improve your Accounts Receivable

The accounts receivable management mainly includes invoicing and collecting payments from customers. A proper receivables management process will allow you to scale your business effectively and meet your operational costs on time. Accounts receivable directly impact the cash flow and the financial health of your business. You need to make sure your customers make payments on time to avoid any cash crunches in your business.

If you face payment delays often, you should take a look at your accounts receivable process and take measures to improve it. Here are a few tips to improve your accounts receivable process.

Review your process

No matter how big your business is, you should review your business’ accounts receivable process from time to time. Get a detailed understanding of how the process is ongoing, how the invoice is issued and how long it takes to receive the payments. Look for any mistakes in your process that have been dragging the whole process down. Ensure your accounts receivable process is organized and proper measures are taken to receive the payments on time.

Invoice customers on time

Delays in invoices can result in payment delays from the customer. Sometimes business owners don’t have enough time and bill their customers at the end of the month. But you should make time to send out your invoice on time rather than let them pile up, which will only worsen things. Using automated invoicing software will let you send the invoice directly to your customers via mail.

Well defined credit policy

A well-defined credit policy should be drafted and implemented if you’re offering credit to your customers. It should start with running a credit check on your customers. The credit policy should include every detail regarding the credit. This includes payment due date, late payments fees, discounts for making payments early, advance deposits, etc. It should also include the procedures taken by your business if your customer fails to make payment within the time agreed upon.

Send out reminders

Reminders are one of the commonly used methods to encourage customers to pay on time. You can send out reminders through multiple channels like phone calls, emails, and letters. You should have a follow-up strategy that works for your business. For example, you can send out an email to remind your customer before the payment is due. If the customer doesn’t make payment within the due date, you can send one more email right after the due date. If the payment is 15 days overdue, you can follow up with calls and physical letters.

You should also keep track of all your follow-up activities as it will help if you need to take any legal actions. If the customer doesn’t make the payment even after a reasonable amount of time and owes you a larger sum of money, you can find an attorney to file a lawsuit against your customer.

Multiple payment options

Offering multiple payment options will help you get paid on time. You can offer online payment options, or payment via credit cards will help customers make payments much faster than sending a check. This is convenient for you and your customers as it can be done from anywhere, at any time. You could also offer payment plans that allow customers to make payments in easy instalments or subscription billing.

Financial forecasting.

You can leverage financial forecasting to get a better understanding of your invoice-to-cash lifecycle. You can use your previous financial data and business trends to predict upcoming payments and optimize your cash flow accordingly. This will get you an idea of when you can expect your payments from your customers and help you make better business decisions.

 

Accounts receivable management directly affects your business cash flow. If you think you need to improve your accounts receivable, we can help!

At Agile e-Platform, our expert accountants will take a look at your financial data and provide AR solutions that will help you maintain a steady cash flow. Contact us to know more.

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