By Analytix Editorial Team
Accounts receivables (AR) keeps stock of the payments received by the business. For a business that is generating a considerable income, managing to keep expenses low, and ensuring effective daily operations, losing track of the accounts receivables still remains a reality and one that can have a negative impact.
For a growing business, it is vital that the accounts receivables, or incoming payments, are managed effectively. When mismanaged, funds can dry up without notice, leaving critical decisions pending, and worse, affecting the business’s abilities to pay vendors, meet tax obligations, or make essential purchases.
Keeping AR Well-Managed
Tracking transactions, recording invoices, maintaining updated contacts for customers, and ensuring payments are followed-up on, are all sound practices for maintaining accounts receivables. However, these actions by themselves do not eliminate the possibility of late payments and debt.
Here are 5 tips that can help businesses ensure better accounts receivables:
1. Move to Electronic Invoicing
Invoicing is a significant part of well-managed accounts receivables. Shifting to an electronic method of invoicing can help ensure customers receive invoices on time and receive alerts and notifications while the business benefits from fewer lost invoices since an electronic system also tracks them automatically.
If customized, an electronic system can also send reminders via email, thus ensuring customers receive payment reminders on time.
2. Create a system to track accounts receivables
Determine the payment status of receivables in your AR. This can be done with the help of an accounts receivable aging report. This report tracks the status of all payments due. Depending on the number of days since an invoice was issued, the report can track the ‘age’ of amounts due, thus helping the business understand where to concentrate collection efforts.
3. Enable Online Payments or Collections
As businesses move into spaces no longer restricted by physical boundaries, payments can be submitted online or through similar electronic methods. Creating an online payment system also allows customers a convenient and secure mode to submit payment.
4. Proactively Follow Collections
An electronic system in addition to an aging report can help zero in on which payments need to be followed-up on first to prevent lapsing into bad debts. Following-up on these proactively can help the business collect funds quicker.
However, this requires updated customer records and addresses, especially if the efforts are time sensitive.
5. Incentivize Payments. Provide Payment Plan Options
Businesses can choose to offer some discounts to customers who pay on time or who make full or partial payments. These initiatives, together with proactive follow-up, can help the business collect funds faster.
Furthermore, for cases that seem unlikely to pay even with incentives, businesses can work out a payback plan which allows for partial payments to be made in installments.
Reach Out To an Expert
One of the best ways to ensure streamlined AR is to outsource the function to a provider who understands the business. Outsourcing to a professional with expertise in managing accounting functions such as AR provides the business owner not just with a resource with functional expertise but with access to technology, technical support, and professionalism to ensure work is executed on time and without hassles. It eliminates the need for a business owner to invest money, time, and attention on optimizing AR functions in house and instead to focus on business-building activities, especially for start-ups or small businesses.
At Analytix, we have extensive experience in helping small to mid-sized businesses in all aspects of business accounting and operations. For more information on how we can assist you, call us at 781-503-9004 or email us at [email protected].