Managing the accounts receivable is extremely crucial for any business, as day-to-day operations greatly depend on it. It’s where you have to draw money to pay your employees, finance your company’s daily expenses, and grow the business, which is why payments must be collected on a timely basis.
Without the expected funds, companies are forced to use money in their reserve that’s intended for
other purposes.
Businesses that declare bankruptcy usually have problems that root to an inefficient collection system, such that they had been unable to collect what the clients failed to pay.
According to studies, one out of four small businesses experience difficulties in managing their accounts receivable because of clients that either short pay them, pay beyond the terms set, or simply unable to pay due to financial setbacks brought about by the slump in the economy.
These situations can be resolved by taking a few steps that ensure better management of your accounts receivable.
1. Evaluate Financial and Credit History
Before agreeing to do business with any company, do a background check first on their financial and credit history. If necessary, ask for feedback from other companies they have previously done business with.Some businesses already have a long list of unpaid credit, which is a good indicator that they may already be struggling with their company’s finances. It’s best not to forge long-term arrangements with them until they’ve completely sorted their finances out.
With companies that may fall into patterns of late payments, consider offering terms that are feasible for them and still profitable to your company.
2. Set Clear Payment Terms
Set clarity on terms of payment between your client and your company.Provide your client with an estimate of expenses they will incur and negotiate an arrangement that would be convenient for them—which does not sacrifice your business’ profit.
3. Do Electronic Invoicing
Gone are the days when snail mail was the only way to get invoices to the clients’ doorstep. Technology has made it possible for businesses to send invoices by email through apps made available on the internet.And there’s no need to wait for monthly cycle billings, as you can send invoices as soon as the projects are completed. Sending timely invoices can help clients prepare for the due date stipulated.
The good news is, many of these invoice apps have set indicators that reflect when clients have opened the email, making it more difficult for them to make excuses for late payments.
4. Provide Multiple Payment Methods
Delays of payment are often caused by the inconvenience of payment methods for your clients. To turn things around, add options to the company’s payment system other than PayPal and Credit Cards.Clients may find the electronic funds transfer system or bank-to-bank method of payment much more accessible.
5. Outsource Management of Your Company’s Accounts Receivable
Every company needs its accounting functions managed efficiently to ensure business profitability. This is why accounts receivable outsourcing is the best option to take for most businesses.Managing your company’s accounts receivable requires regular and consistent reviewing and monitoring, as there are payments to input regularly and receivables to follow up.
You may not have the time or the adequate number of staff to keep up with it and still take care of the other tasks that need to get done. By partnering with a reliable AR outsourcing company, you can be assured that someone who is trained and equipped to do the job is keeping a sharp eye on your transactions.
The Impact of Your Accounts Receivable Management to Your Business
Any mismanagement of your accounts receivable will directly impact your business. The profit that you expect to make out of doing business with your clients is your business’ lifeblood.Managing your accounts receivable is a time-intensive function for an excellent reason. No company can afford to take their hands off it and expect their business to grow.
The problem is that there may not be enough time for you and your staff to do this. Our team, at Infinit Accounting, can take that load off our clients’ shoulders by providing an efficient service in organization and management of their accounts receivable.
