If there are cash flow issues in a company due to lack of accounts receivable management then it will stop the company’s growth and will also lead to loss.
FREMONT, CA: Cash crunches are not always a result of a business growing too fast. It is often due to customers paying late. As the company grows, it is easy to get sales locked up in Accounts Receivables (AR). This AR division of a company is directly responsible for collecting customer payments. Thus, it's directly responsible for the health and well-being of the cash flow into the business.
Here are some ways to improve an accounts receivable collection:
1. Create An A/R Aging Report
It is necessary to find the current payment status of all the accounts receivable to take control of the collections efforts. This can quickly be done by creating an account receivable (A/R) aging report, which will track and measure the payment status of all the customers. Accounts are broken out by the number of days since the invoice was issued, such as 0-30 days, 31-60 days, 61-90 days, and more than 90 days. Another way is to calculate the company's Accounts Receivable Turnover (ART) ratio, and it will evaluate the business's ability to issue credit and collect funds in a proper time.
2. Automate your invoicing
To avoid the apparent delays and costs associated with postal mail, it is necessary to introduce electronic invoicing. Automation will also reduce manual time and effort spent contacting accounts. It will also reduce human error, and billing will be done quickly and easily without any hassle. Automating your invoicing process also enables scheduled payment reminders to notify your customers about their unpaid invoices via email, text, phone calls, and other communication channels. These solutions can be configured to create efficiency in your AR process.
3. Talk To The Bank About Cash Management Tools
To enhance collections and to better manage the cash-flow cycle, banks provide a variety of cash management services. There is one more way to avoid the check in the mail, an excuse is to implement electronic payments for the clients through Automated Clearing House (ACH), and so they can pay electronically and boost the cash flow immediately. One can create more efficiency throughout your business, saving you and your employee’s time by implementing cash management tools that allow bettering track accounts receivable.
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