Best practices of accounts receivable for long term financial stability
Appropriate and efficient management of accounts receivable is vital to the financial health & wellbeing of your business. As such, within this article, we’ll discuss best practices of accounts receivable for long term financial stability, and how accounts receivable software can help with this.
Use online payments & billing: switching to or offering an online payments service and using electronic billing software will deliver invoices and payment requests to your clients quickly & efficiently, also providing your clients with an immediate and easily accessible way to pay their invoices - leading to faster payments and significant DSO reduction.
Set up and use email automation where possible: just like online payments & billing, utilising email automation - automating follow ups and reminders, for example - will streamline and speed up collections processes whilst also improving communications between your staff and clients, and streamlining your teams’ workload(s) - increasing productivity and allowing them more time to dedicate to higher value tasks.
Create and communicate clear payment terms: creating clear payment terms & conditions and communicating those terms with your clients serves to ensure all parties understand and can therefore agree to invoice payment within a specific time period - further reducing DSO, increasing cash flow and supporting long term financial stability.
Research new and potential clients: carefully researching new and potential customers will allow your accounts receivable department to set accurate credit limits that respond to client circumstances. This will lead to a reduction in bad debt exposure whilst encouraging clients to pay outstanding invoices within the expected timeframe.
Ensure all team members are involved and informed: involving and informing the sales team in the payments process and ensuring your finance and sales teams work closely together in a positive and productive way will have a significant impact on accounts receivable as understanding the payment process(es) will lead and inform the deals they close, ensuring that these deals turn into working capital and cash for the business.
Invoice accurately: invoicing accurately and appropriately will also support long term financial stability, ensuring your clients are provided with the right invoice at the right time with the correct payment details for swift and easy payment. Accounts receivable software offering automation, including email automation, will help to reduce inaccuracies and mistakes made through human and/or processing error(s).
Centralise and maintain customer data: if your customer data exists in multiple places such as localised Excel spreadsheets or individual Google Drives, this can slow down and hinder timely and efficient payments and the processes that sit behind them. Instead, using accounts receivable software that provides dashboard reporting of specific KPIs and centralises key customer data will allow your team to efficiently view and access core metrics and validate the accuracy of client accounts.
Standardising late payment procedures: dealing with late payments is a harsh reality of business but having a standard procedure to dealing with and collecting late payments will aid in alleviating stress & anxiety, and collecting late payments as quickly as possible whilst minimising damage to client relationships. A strict late payments procedure can also encourage timely payment as clients will not want to incur payment penalties.
Conduct regular reviews: analysing and reviewing accounts receivable regularly - such as every week - will provide both clarity and directly, and ensure teams remain well-informed. A weekly AR review also enables teams to troubleshoot issues, manage risks and flag up any potential issues.
CreditForce has been designed to optimise collections management and accounts receivable; providing an end-to-end credit management software solution that focuses on cash generation, rapid query resolution and intelligent workflows to improve customer experience, a reduction in DSO and an increase in team productivity.
As a total solution, CreditForce makes the complex simple with an innovative dashboard suite, helping you to measure every A/R, Working Capital and SRA RCAB KPI to realise peak performance.