Accounts Receivable: 6 Ways to Improve Accounting
Numerous departments make up even the smallest of business. To be successful, you want to be certain your accounts receivable is operating efficiently. Even if you think it is working fine, it can always work better. Here are some tips to implement to take A/R to the next level.
- Be Proactive in Collecting Invoice Payments
If your business relies on sending out invoices to customers, then you need to take an active approach to collecting those payments. As soon as the time limit you have given arrives, you need to contact the customer. This does not have to be an aggressive conversation. A friendly reminder is simply all that is needed to remind someone that you need to be paid.
- Consider Discounts
One way to entice people to pay on time is to offer small discounts. For example, if you ordinarily give customers 30 days to pay off an invoice, then you should offer a small incentive to customers who pay off the invoice in 20 days. Even a two percent discount can be enticing, and you get the money you need sooner.
- Offer a Payment Plan
You might have some clients who have trouble paying off the full amount of in the invoice on time. Work with your accounts receivable department to set up financing options. Offer those clients a payment plan, so you get your money over time.
- Develop A/R Aging Report
You want to classify customers based on when they typically pay off invoices. Separate clients into those who pay off invoices in less than 30 days, those who pay in between 30 and 60 days and those who take longer than 60 days. This will let you know who is good to do business with going forward.
- Be Willing to Take Legal Action
Some customers just need a nudge to pay off a late invoice. However, other clients may not be so forthcoming. In those cases, it may be best to look into your legal options.
- Look Into Cash Management Options
Talk with your bank about setting up methods that make it easier for clients to pay. For example, you can establish an electronic payment system, so customers can pay you online as opposed to sending in a check.
Once you establish these accounts receivable practices, you are bound to notice an overall improvement in that department. Do not neglect your company’s invoices. By being proactive, you will notice a much steadier flow of cash coming in.