5 Ways to Manage Accounts Receivable Effectively
Before learning the ways to manage accounts receivable effectively, let us understand what it is and why it is important.
What Are Accounts Receivable?
In accounting terms, account receivable refers to the money that businesses should receive for providing goods and services. They are the major source of revenue for any business. Likewise, they are listed as assets in bookkeeping records. Furthermore, the profitability of any business depends on the accounts receivable amount. If they are greater than your liabilities and wages, your business is in profit. Otherwise, you must look to cut down your expenses or increase your sales.
5 Ways to Manage Accounts Receivable
The functioning of your business depends on the accounts receivable. You must prepare invoices for each transaction and make sure all the payments are received.
You can use the following five tips to better manage accounts receivable more efficiently.
After you make a sale, making and sending out invoices is the first step to receiving your payments. Customers and businesses ask for invoices before they prepare their payments. If you send out invoices quickly, you are likely to receive your payments quickly.
With electronic invoicing, you can create and send several invoices within a few minutes. Likewise, there is a minimum chance of entry errors. Similarly, searching and correcting errors is more convenient compared to paper invoices. Furthermore, with electronic invoicing, a single employee can carry out a huge volume of tasks saving labour costs. Moreover, adopting paperless transactions is planet friendly as well as reduces costs in paper and printing.
State Your Terms Clearly
When you make a sale, state the payment terms clearly. The terms should contain the allowed payment period and the provision of penalties in case they fail to do so. Likewise, you can mention discounts for early payments to encourage your customers. Similarly, you must closely follow up on the payments with timely reminders and calls. Furthermore, it is important to keep your terms flexible so that you can design it specifically for each customer.
Provide Flexibility in Payments
For a modern business, there are several payment options to choose from. Accepting a wide range of payment options will allow you to do business with more customers and receive your payments quickly. Digital payments and credit cards have been growing in dominance over cash and cheques. If you have a business website, you can integrate payment gateway facilities to accept credit/debit cards. Likewise, digital payments services also provide interfaces that can be integrated with your website.
Additionally, you can integrate these technologies with bookkeeping and invoice management to automate receiving payments and updating your books.
Evaluate Your Customers Early On
Before you start doing business with a customer, it is better that you evaluate their credit history. Since bad debts are very hard to recover, spotting early warning signs will save time and money in the future. Look out for reviews and ratings on their websites and investigate their recent performances. Sometimes, you must be ready to walk away from a troublesome customer even if it means you are losing business.
Maintain Good Communication With Customers
One of the most effective ways to manage accounts receivable is to maintain good communication with your customers. If you have a sound relationship and constant communication, your customers are likely to pay in time. Likewise, you can instantly follow up on their financial troubles and delays. This allows you to adjust your cash flow for the time being. Furthermore, avoiding confusion is a key strategy to build a long-lasting relationship so that you can do business longer.
How Can We Help?
From this blog, we have learned how to better manage accounts receivable and why it is important.
3E Accounting can provide world-class accounting experts in Hong Kong who can advise and assist you to manage accounts receivable effectively. Our professionals have unmatched expertise and years of experience in this field. This allows them to build solutions that are the best for your business.
Even though our services are top-quality, they are still very affordable. Moreover, our guaranteed satisfaction is backed by thousands of our customers worldwide.
Contact us at +852 5749 4859 or email at firstname.lastname@example.org for more information.