Achieving business success is a multi-step process that requires equal dedication to marketing, sales, and customer service. Despite the apparent benefits of an accounts receivable management system, many business owners will overlook this methodical approach in favor of lower-cost solutions.
However, devoting the time and effort to improve your AR plan will drastically refine aspects of your business and prove a high return on your investment.
Why Your Accounts Receivable Strategy Matters
Proactively optimizing your process prevents existing capital from going to waste, which will, in turn, boost liquidity. If the key to outperforming your competitors is to lower costs, a healthy AR campaign can simultaneously fund growth while reducing debt.
As with every business strategy, you’ll want to get a head start on your AR. By discussing payment terms in the early stages of nurturing customer relationships, you promote mutual trust and transparency, leaving little room for misconceptions.
Pitfalls to Avoid
Most business owners approach their AR strategy as an afterthought, negatively impacting budget, and productivity. Typical AR-related missteps include the improper handling of cash payments, inaccuracy in invoices and statements, and failure to generate useful reports.
Any mishandling of AR tasks can produce a far-reaching ripple effect that can stunt even the most profitable businesses.
The Golden Rules of Accounts Receivable Processing
Though daunting at the outset, streamlining your accounts receivable management processing can produce rapid and dramatic improvements. Prioritize optimizing these accounts-related activities to improve the overall functionality of your business operations.
1. Maintain Accurate Customer Data
Centralize master data processes to maintain accurate information on customer accounts. Through regular audits and a run-through of anomalies, you can avoid mailing invoices to the wrong addresses or designating incorrect credit limits and discounts.
Always document customer data changes, taking into account system permissions to prevent unauthorized employees from accessing sensitive information.
2. Streamline Your Approvals Process
Sometimes, business owners will indulge in poor credit habits to boost sales—don’t be one of them. Occasionally, extending credit limits is necessary, but knowing when to override them or place accounts on hold can save your business a lot of money.
3. Establish an Efficient Billing Process
When billing and invoicing customers, errors in pricing or units of measure can lead to costly mistakes. Relying on technology to automate these processes can reduce oversights and deliver the appropriate forms promptly. Consider setting up a customer portal to give your clients a sense of autonomy.
4. Give Your Cash Application Process a Once-Over
Processing payments involve some mixing and matching. As much as possible, keep payment options simple to avoid complicated disputes. Survey customers to find out which payment methods they prefer. Post journal entries promptly and avoid funneling cash into suspense accounts.
5. Optimize Your Collections Process
Keep collection efforts consistent and systematic. Clearly defining your process can help pinpoint at-risk accounts and align payment plans with your overall objectives. Prioritize automating tasks that often encounter discrepancies due to manual entry.
6. Go Electronic
Billing electronically minimizes the need to mail and paper checks. Removing the human element from AR allows the process to become more accurate and reliable.
Empower Your Accounts Receivable Management System
You don’t need to start from scratch when optimizing your accounts receivable process. You can revamp your methods a step at a time or make one full sweep of each facet. Either way, deciding to improve your AR functions will translate to handsome rewards for your business.
Through the technology solutions at Credence Global Solutions, you can reap the best of our accounts receivable management services. As the information age demands the presence of new technologies in every industry, we commit to providing your business with the appropriate tools. To find out how our solutions can benefit your business, contact us today.