It is important to master accounts receivable management that will ensure a steady revenue stream and cash flow management for your business. Through efficient processes, the payments will be on time and will also foster healthy client relationships along with maintaining high liquidity.
On the contrary, if you neglect accounts receivable management, the outcome may be accounting mistakes, lost revenue, wasted resources, and better cash flow.
1. Establish Clear Credit Policies: Accounts receivable management companies
must approach billing processes with consistency and clarity. Therefore, it is essential to document the process for everyone to follow similar procedures. The billing process must include the following:
Your billing process should include the following:
- Billing periods
- Invoicing dates
- What kind of information to include on each invoice (e.g., Purchase Order numbers, addresses, and others.)?
- Record-keeping procedures
- Periodic AR process assessment and follow-up
- Collections procedures for overdue payments
Along with these, you must also follow to bill clients with accuracy and include all the billing contact details of each client and their payment details.
2. Automate the Invoicing Process
You must save time and increase the consistency of your process. It can be easily done by automating account communications with your clients thereby reducing manual processes. Automating the most tedious tasks in the process such as preparing emails and pulling out invoices is the key to AR automation. Some account receivable management services that can help you are setting a form email that can be sent with an invoice and sending reminders when payment is overdue.
3. Provide multiple payment options
The AR processes can be improved by providing multiple payment options that will help in quick payments. Some recommended payment options are credit cards, debit cards, automated clearing houses for recurring payments, and virtual cards. Companies need to include customer preferences that will help to improve the effectiveness and efficiency of their accounts receivable management. By providing multiple payment options, customers can pay easily on time due to flexibility.
4. Offer Incentives for Early Payments
Accounts receivable management software allows businesses to automate the creation of invoices and set up early payment discounts or incentives for customers who settle their bills promptly. The system can track payment due dates and automatically apply discounts to eligible invoices. By offering incentives for early payments, businesses can encourage customers to pay faster, improving cash flow and reducing the risk of late payments. This also frees up time for staff, as the software can handle communication and discount calculations.
5. Implement a Strong Credit Control System
It is essential to implement a strong credit card system to reduce the risk of bad debt. AR management software will help businesses manage credit risk by assessing their customer payment history and creditworthiness. The software will help to generate automatic reminders for customers who have overdue payments or are approaching their credit limits.
6. Monitor Key Accounts Receivable Metrics
AR software helps to monitor significant metrics such as aging reports, collection effectiveness index (CEI), and days sales outstanding (DSO). All these metrics provide valuable insights into which accounts need attention and how long it will it take to collect receivables. Businesses can make informed decisions by tracking these primary performance indicators and help in cash flow management.
7. Strengthen Customer Relationships
Effective accounts receivable management is not only about collecting payments but also about maintaining positive customer relationships. Through AR software, businesses will send customized invoices and reminders. It will enhance communication and will avoid misunderstandings. If the payment processing is efficient, customers may trust businesses that lead to long-term relationships.
Schedule a Consultation with CFO Mantra to improve your AR management
Businesses who want to improve their AR management may use our accounts receivable management software. It will not only strengthen customer relationships but will also help in cash flow management.
CFO Mantra will help organizations handle their accounts receivable and payable smoothly with our AR software. Call us at 91-011-49854111 to schedule a demo of how to manage your accounts receivable.
