For maintaining a healthy cash flow, you need to manage accounts receivable. Every business needs effective strategies to deal with outstanding payments efficiently. Proper accounts receivable management can affect your company’s financial stability. Without effective systems, you won’t be able to deal with cash flow issues. This blog will explore proven accounts receivable best practices. We’ll also discuss strategies that improve collection rates and minimise payment delays.
Fundamentals of Accounts Receivable
In accounting, accounts receivable indicate money owed by clients for services or goods. These outstanding amounts are declared as current assets on balance sheets. On the other hand, accounts payable indicates money a business owes to its creditors or suppliers, declared as liabilities. You can create effective accounts receivable strategies by understanding your customers’ payment patterns. By seeking help from a bookkeeper in Melbourne, you can let them handle accounts receivable. Their understanding of customer payment patterns will help identify possible collection issues early.
Debtors’ accounts receivable management needs systematic monitoring and tracking. Regular receiving can help you avoid small issues from becoming major problems. Accounts receivable management involves various interconnected processes. Each phase is responsible for the overall collection success rate.
What is Accounts Receivable?
Accounts receivable refers to the money that clients owe your business for services or products you have already delivered. In simple terms, you have delivered the services or goods, and now, you are waiting to be paid.
What is Accounts Receivable Management?
Accounts receivable management is a process that involves monitoring, collecting, and optimising payments owed to your business. It ensures steady cash flow and financial accuracy through effective coordination between invoicing, collecting payments, client communication, and dispute resolution. Here are some primary components:
- Timely invoicing and accurate billing
- Accurate payment processing and reconciliation
- Clear communication with internal teams and customers
- Effective credit control and collection strategies
This function bridges the gap between finance and sales, ensuring revenue is collected on time while maintaining strong customer relationships.
Best Practices for Accounts Receivable Management
Effective cash flow management is crucial, which can be achieved by managing accounts receivable outstanding to the business and ensuring that businesses are paid on time.
- Invoice promptly
After delivering products or services, send out invoices. An Accurate invoice includes the payment due date, the amount owed, and payment methods. The sooner clients receive their invoices, the sooner you can expect to receive your payment. It’s essential that your payment terms are easily identifiable on your invoices to allow clients to meet these requirements. Bookkeepers can help you prepare invoices to send to your clients on time, so they can make payments on time. Despite this, bookkeepers can also help you with accounts payable, tracking financial records, preparing a bank reconciliation statement, and providing many other services.
- Track invoices and payments
Ensuring that updated records of outstanding invoices and payments can help check which accounts are still outstanding. This will help you learn about payment patterns and adjust your strategies accordingly.
- Follow up daily
Once you are aware of which invoices are outstanding, you can follow up daily to ensure clients know about the outstanding account. Many businesses believe that a friendly email or call can influence customers to pay faster. Make sure to check in on overdue accounts daily, depending on your payment terms, to ensure they are received.
- Offer payment options
If you provide your customers with different payment options, you can ensure better payment management. There are service offerings that integrate with accounting software to allow the use of credit cards to make payments. This can make it easy for clients to settle their debts, benefiting your cash flow.
- Build good customer relationships
Building good customer relationships can lead to faster payments. Professionals will stay in touch with your customers and provide excellent customer service. When clients feel valued, they prioritise paying their bills on time.
Conclusion
Effective accounts receivable management needs strategies and consistent implementation. Following the best practices for effective accounts receivable management can help you get paid on time by your customers. You can also rely on reliable bookkeeping services for accurate records, accounts receivable, accounts payable, and many other bookkeeping tasks.