Accounts receivables are outstanding payments to a company from its customers. Managing accounts receivable can be a tedious task, especially for SMEs. In one of our blog posts, we discussed the basics of accounts receivable and how we can finance them. Accounts receivable are valuable assets that can make your cash flow delay due to late payments, however, at the same time, they can be used to get quick funds when in need. Managing accounts receivable can be challenging but pays off in the long run.
Here are some tips to effectively manage your accounts receivable of your business.
Tip #1: Know Your Customer
Invoices are normally raised with a due date that comes later on, typically 15-60 days. This time period varies based on many factors. Before invoicing your customers, it is important to know about the credit status of your customers. Having a check on the customer’s previous records and relations with different suppliers will help in building a reliable business relationship. This will also help in assessing the credibility and capability of the customers to pay for the services you are providing.
It is also important to keep clear and updated customer data. This means having a regular check on the billing and mailing address, credit limits, inappropriate payments and so on. An invoice mailed to a wrong address or with the wrong payment details can affect the entire process. Having a regular update on this data can be helpful in managing and keeping track of the payments.
Integrating all the account details into an accounting software can be a useful tool in managing the finances of your business overall. At Finaxar, we make use of such accounting software to assess your application for receivable financing.
Tip #2: Set Realistic And Specific Terms And Conditions
Having proper and detailed terms and conditions for the invoices raised is necessary. It is not wise for you to extend credit services without any limiting factor just to get more sales. While invoicing a customer, specify a definite time period for the payments, mode of payments, when to remind and other details. This will not only help to build good relationships with your customers but also help with the cash flow management of your business.
Having an established system to raise invoices will help to maintain an organized record on accounts receivables. This will help to have your invoices devoid of errors in the amount, unit measures and other details. Also, automating your invoices can help to be accurate in this regard.
Tip #3: Multiple Payment Options
In this digital era, people use many different payment methods. Your customers may not always be using traditional payment methods like a bank cheque. Providing multiple channels for payment to your customers will be a smart idea. Especially, when there are easy online payment methods available.
For example, there are mobile applications that allow easy and secure transfer of cash. These types of payment methods can be useful when it comes to a customer who wishes to pay in small amounts.
Having a flexible payment method will ease the transactions. At the same time, you need to have an effective system to track down these payments and add them to your financial records.
Tip #4: Making Use Of Technology
The collection process can be made easy by having a specific plan. A defined and methodical collection plan can be effective in tracking your accounts receivables. Setting up an automation tool to notify when an invoice is raised and when it is time to collect will make the tasks easy and timely. There are different accounting software that helps with this process.
The use of electronic billing and automation tools can reduce the human interaction in the process and thereby reduce the errors. Accounting software like QuickBooks and Xero can help you with having an organized financial data of your business.
Takeaways…Managing your accounts receivables will help you in the long run of your business. Having an organized and updated record of your business finances always comes handy when you are applying for external funds. Using accounting software makes these tasks easy. Finaxar provides a hassle-free way to cash your invoices at a low-interest rate. Speak to our business finance specialist to know how Finaxar can help boost your cash flow.