The accounts receivable stores the payments received by the business. For a growing business, it is important that accounts receivable, or incoming payments, are managed effectively. When mismanaged, the money can dry up without notice. This can lead to important pending decisions, and even worse, as a result, it may affect a business’s ability to pay vendors, meet tax obligations or make necessary purchases. Here are 9 tips that can help businesses improve account receivables:-
- Transfer to Electronic Invoice:- Invoicing is an important part while managing account receivables. Transferring to the electronic mode for invoicing can help your customers to receive invoices on time through WhatsApp, email, SMS, etc., and receive alerts and notifications. Electronically sent invoices are automatically tracked and thus ensuring customers receive timely payment reminders.
- Allow online payments:- As businesses move into locations restricted by physical boundaries, payments can be submitted online or through similar electronic methods. The creation of an online payment system can provide a convenient and secure mode for customers to deposit payments. Due to which the problem of paying customers will be solved and the creditor also does not have to wait to get the money.
- 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 attainable aging report. This report tracks the status of all payments due. Depending on the number of days after the invoice has been issued, the report can track the ‘age’ of the dues, thus helping the business understand where to focus for collection efforts.
- Review receivables aging reports:- The age of the receivable is a periodic report that classifies the company’s accounts in the receivable category for the period due to the invoice. It is used as a gauge to determine the financial health of the company’s customers and inform customers about dues.
- Call late payers:- Paper-based late notices may be good for documenting your efforts to collect, but they do not present proof of receipt by the customer until the registered mail has been sent. Similarly, emails can get lost in spam folders, especially when they are from automated systems. But a phone call is effective, and once the call begins, customers will be more aware of their debt, and generally more responsive. Moreover, you can utilize the friendly payment reminders for better records and results
- Increase payment, Provide payment plan option:- Businesses can choose to offer some discounts to customers who pay on time or who make full or partial payments. These initiatives, combined with active follow-up, can help the business collect funds faster. In addition, for cases that are unlikely to be paid even with incentives, businesses can employ a payback plan, which allows for partial payment in installments.
- Proactively Follow Collections:- In addition to aging reports, an electronic system can help zero in, requiring earlier payments to prevent bad debts. Adhering to these regularly can help the business to raise funds quickly. However, this requires updated customer records and addresses, especially if the effort is time-sensitive.
- Sell the hopeless AR cases:- Businesses can either sell their dead debt accounts to a collection agency or obtain a loan against them from a factoring service, often for a small percentage of the face value.
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