Accounts receivable management is arguably one of the most important pieces of your business. It is the part of your business that controls cashflow. Without it, you can’t calculate your profitability. If you fall behind or if your information is inaccurate, you’ll struggle to find a lender or investor who may be willing to provide the financial support you need for growth. Without a doubt, it is imperative that you stay on top of this crucial area. Here are 5 simple steps you can use to improve your accounts receivable management.
Centralized, Accurate Client Information Is a Must
The very first simple step you should take to improve your accounts receivable management is to review the accuracy of client information. It’s really hard to get paid on time if invoices aren’t being sent to the right address. Client data should be stored in a secure, centralized way. This means that not only is the information protected, it’s easy for you and your employees to access. It means that changes are made immediately (and documented). Making use of cloud-based accounting and billing technology that also accepts payments is a great way to centralize your data. Most have a way for you import existing data.
Every quarter, you should review client data to ensure that it’s accurate. You should also review due dates, payment terms, credit limits, and discounts. If these items are changed, those changes should be documented and within the scope of authority of the person who made the changes. Creating a written policies and procedures manual can be extremely helpful as a guide for handling ARM.
Establish Proper Credit Controls
Providing credit is a great way to expand your business. However, it also creates more risk. You must establish (and use) proper credit controls. Credit controls should include how establishing credit with your business happens (including the use of a credit app), how the evaluation occurs, when accounts are placed on hold, and how a client may apply for a higher credit limit. You can learn more about creating a credit policy by reading this post.
Create an Effective Invoicing Process
The invoicing process is an important consideration in accounts receivable management. You should make sure that your invoice is easy to read and understand. You should also make sure that invoices are created and sent out in a timely manner. One way to do this is to automate the process. There are a lot of fantastic choices out there for invoicing. Choose one that provides you with features that you’ll actually use. Bonus points if it allows you to accept online payments.
Apply Payments Upon Receipt
Of course, if you’re using a cloud-based ARM solution and the client elects to make a payment online, the payment should post automatically. You’d also receive a notification that the payment was made, how it was made, and when it was received. If you accept cash, credit cards, debit cards, or checks in person, make sure that those payments are applied upon receipt. Do not wait until the end of the day (or the end of the week) to apply payments. Do it immediately. This simple step makes your accounts receivable management more accurate.
Create and Follow a Collections Timeline
The collections process is part of accounts receivable management. You should have a collections timeline in place for your business that’s being used. What’s a collections timeline? It’s a guide that explains what happens to an account at certain intervals once it goes past due.
Clients ARM – Your Accounts Receivable Expert
If need help improving your accounts receivable management, call Clients ARM now. With more than 30 years of experience, we have the expertise you need to help you improve. To learn more about how we can help you, schedule your free consultation!