Proper accounts receivable management has a significant impact on the revenue and cash flow of your business. A solid system for managing accounts will help to strengthen the monetary base, which will be the foundation of the company's advancement.
Done efficiently, you will receive timely payments, happy client relationships, and high liquidity for your business. Poor management, however, can lead to wasted staff time, accounting errors, lost revenue, and poor cash flow.
What Is the Objective of Accounts Receivable Management?
The goal of effective accounts receivable management is to optimize your billing, payments, and collections process to minimize the time it takes to get paid and eliminate the risk of bad debt.
These tips help you to improve your accounts receivable management and make payment collection effortless and efficient.
1. Use Electronic Billing & Online Payments
Ditch paper, snail-mail billing, and paper checks. Those are easy to lose and time-consuming to track. Instead, switch to an electronic invoicing system that lets clients make payments easily online. Integrate your billing and payments. This automates your record-keeping, so there is less for you to keep track of, and it decreases the chances of human error.
2. Prompt and Punctual Invoicing
Sending your invoice promptly reinforces your company's professionalism and thoroughness. However, this also signals the seriousness with which you treat payments. As a result, customers will be less likely to defer payments to companies that take accounts receivable seriously.
3. Monitoring Receivable Accounts
Customers are generally given a window of opportunity to settle their dues after receiving the invoice. A robust calendar-like system that tracks deadlines and alerts customers for the appropriate follow-up actions can help you forecast your cash flow. Following up helps identifies any oversights or lost payments. You can also use it to flag problems early in the process and help determine the best way forward for collecting payments.
4. Keep Your AP Days Shorter Than AR Days
If you must sell on credit, make sure that the time it takes to get paid (accounts receivable days) is always substantially less than the time it takes to pay your obligations (accounts payable days).
5. Get Someone to Walk Through Your Cash Flow Statement
Ideally, this would be your bookkeeper or accountant or someone with a background in reading financial statements. Look carefully at one line item, which is the cash flow from operations.
Reach Out for Help
Everyone deserves a supportive team of people who care. Cloud Bookkeeping Inc’s team provides monthly bookkeeping and accurate financial reports. We will give you financial visibility throughout the year and deliver insights to make strategic business decisions.
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Cloud Bookkeeping, Inc.
3281 E. Guasti Road, Suite 700
Ontario California 9176
Tel: +1 (909) 952-3804
Website: www.cloudbookkeepinginc.com