Accounts receivable (AR) is the money that a business is owed by its customers for goods or services that have been delivered or rendered. A well-managed AR process is essential for any business, as it ensures that customers pay their bills on time and that the business is able to maintain its cash flow.
Here are some best practices for accounts receivable management:
- Establish clear billing procedures. Your billing process should be clear and consistent, so that everyone in your company knows what to do. This includes the following:
- What information should be included on each invoice?
- What are your payment terms?
- What are your late payment policies?
- How will you track and manage your AR?
- Use a reliable accounts receivable software. A good AR software can help you automate your AR process and track your receivables more effectively. There are a number of different AR software solutions available, so you can choose one that fits your needs and budget.
- Send out invoices promptly. The sooner you send out an invoice, the sooner you will get paid. Make sure to send out invoices as soon as possible after the goods or services have been delivered or rendered.
- Follow up with late payers. If a customer does not pay their invoice on time, it is important to follow up with them promptly. This will help to ensure that they do not forget about the invoice and that they pay it as soon as possible.
- Be professional and courteous when collecting payments. Even if a customer is late paying their invoice, it is important to be professional and courteous when collecting payments. This will help to maintain good customer relations and avoid damaging your reputation.
- Use a debt collection agency if necessary. If a customer is still not paying their invoice after you have followed up with them, you may need to use a debt collection agency. Debt collection agencies can be effective in collecting unpaid invoices and managing your customer’s payment plans.
By following these best practices, you can improve your accounts receivable management and ensure that you get paid on time.
Here are some additional tips for effective accounts receivable management:
- Set realistic payment terms. Your payment terms should be realistic and reflect the needs of your customers. If your payment terms are too strict, you may lose customers.
- Offer discounts for early payment. Offering discounts for early payment can encourage customers to pay their invoices on time.
- Be flexible with payment options. Some customers may prefer to pay by cheque, while others may prefer to pay online. Offering a variety of payment options can make it easier for customers to pay you.
- Track your AR closely. It is important to track your AR closely so that you can identify any potential problems early on. This will help you to take action to collect any outstanding invoices before they become a problem.
By following these tips, you can improve your accounts receivable management and ensure that you get paid on time.