How to Manage Accounts Receivable like a Professional

The overall management of your accounts receivable will influence the consistency of your company’s cash flow. Hence, it is important that a consistent cash flow is maintained. This can be done by ensuring that your company receives all its payments within a specific time. This can be challenging, though, when you are small company working with numerous big retailers who can take as long as 90 to 120 days to pay their vendors. But it is possible to establish an organized accounts receivable strategy with professional help and by implementing certain practices.

Tips to Manage Accounts Receivable

The following are some of the accounts receivable practices you should take on to regulate your company’s cash flow:

• Payment tracking system

Keeping track of the payments you receive from clients will help ensure they are cleared on time. Your business should have an accounts receivable journal entry and aging report that will categorize the payments based on the length of time the invoices have been outstanding. This will help to quickly review and identify pending invoices that are 15, 30, or 90 days overdue, and you can take steps accordingly.

• Strong credit policy

The terms and conditions upon which companies can supply goods and services to you on credit is the most basic definition of credit policy. In order to better organize your accounts receivable, it is important to have a strong credit policy in place. if you have customers who want to apply for an account with your company, ensure you have a strict policy regarding who qualifies for such credits. Early payment discounts, late payment fines, and reminders to pay are some aspects of accounts receivable that you can incorporate into your credit policy. Implementing them strictly will help you avoid habitually late-paying clients.

• Shorter payment terms

When you have shorter payment terms, the said late-paying customers will try to pay more quickly to avoid fines. Also, depending on the kind of service the client seeks, the relationship with the client and their track record can set the payment terms accordingly to avoid pending invoices. Taking these measures will also help stabilise cash flow.

• Automate with software

There are numerous types of accounting and bookkeeping software that can look after your accounts receivable, and the process becomes more accurate and faster when you can remove the human element. You can also automate past due reminders or get notifications about pending payments. Moreover, records of all transactions will be available in the software, making it easier to maintain accounts receivable journal entries.

• Get a helping hand

Finance and accounts are not easy to handle, and it is always wise to get professional help for accounts receivable in order to keep track of your cash flow. If your team is unable to keep up with its growing number of clients and accounts, that is an indication that you need a bookkeeper. One option is to outsource the work to a virtual bookkeeping company that offers accounts receivable services. This will help you organize work better, divide responsibilities, and even create an effective credit policy. Altogether, the process will be less time consuming and more efficiently executed since these professionals specialise in this service.

Choosing accounts receivable professionals is a smart way to make sure you are not burdened with too much work, and, at the same time, your cash flow is closely monitored and managed. Maintaining the above-mentioned business practices will also help you stabilize your company’s cash flow, and this in turn will make sure that you have consistent and steady profits.