Accounts receivable is the most critical, yet challenging, process for any organization. Improper accounts receivable management leads to unhealthy cash inflows and easily to the downfall of a business. There are several challenges that businesses face during their accounts receivable process cycle like incorrect data, errors in invoicing, invoice delivery problems and resource problems.
If companies take control of their accounts receivable process and employ the right steps and related tools, they can overcome these challenges in no time at all. Some of the steps to maximize AR collections are outlined below:
- 1. Go electronic :
Use the electronic options that are available these days as much as possible. Send the bill via e-mail and ask for a confirmation from the buyer regarding the receipt of the bill. Ask clients to make their payments online from the comfort of their office or home to save time.
- 2. Perform regular analysis :
Review your Accounts Receivable on a weekly or a bi-weekly basis. This helps prevent defaults by customers or identifies defaulting clients that you should stop doing business with to prevent growing AR balances. Reviewing your reports on a regular basis and taking a proactive approach will help in resolving problems before they become disastrous for your business.
- 3. Maintain good working relationships with your clients :
Happy customers are more likely to pay their bills on time. If the client is facing cash flow issues, he will obviously prioritize paying those organizations with whom he has a positive relationship over the ones with whom he rarely talks. Always strive to meet your deadlines and customer expectations and develop strong working relationships with each one in order to avoid late collections.
- 4. Build a strong relationship with a reputable accounting customer service company :
Managing accounts receivables can take a great amount of time and energy. The best option for reducing workload while boosting cash flow is to hire a reputable accounting service provider that can handle all your finance and accounting functions enabling you to focus on the growth of your business.
- 5. Set clear credit policies:
Working with a customer for years may tempt you to offer higher credit limit to them to spend more on your products and services. However, extending too much credit can take a serious toll on your accounts receivable balances if they aren’t really good for that additional money. Before extending credit to a client (new or existing), you should always check a business’s credit history to ensure its record of paying bills on time. Also, detailed expectations of repayment should be given to your clients before any agreements are made.
- 6. Remove payment barriers:
Give your customers a wide range of payment options. This will enable them to choose from a spectrum of payment methods such as credit cards, bank transfers, wires, debit cards, e-checks, and select the one that works best for them. Providing this flexibility will greatly increase the chances of receiving payments on time from your customers – making it easy for them will make it easy for you! Also, providing an online payment portal, which can be open 24/7, will allow even greater flexibility for you customers to make payments anytime in any manner.