Finance is one of the most important parts of running a business. Only well-managed finance can ensure the growth and sustainability of your business. That is why you should be familiar with some of the best financial practices in business, like accounts receivable and collection. To use it in the most efficient way, you can implement accounts receivable automation software. Read on to learn how you can implement accounts receivable efficiently to run your business smoothly.
What is Accounts Receivable?
The term Accounts Receivable (AR) is a financial term. It refers to the payment the company will receive from their clients who purchased their products or services on credit. The credit period is usually short, somewhere between a few months to a year.
In this case, a sale is registered when an invoice is generated. However, the customer gets an extension in the time limit to pay the amount. It is a current asset of the company so that it can provide an indication of the company’s liquidity.
How to Manage Your Accounts Receivable Efficiently?
A systematic and steady process for managing accounts receivable and collection can lead to significant growth in your profits. That is where automation steps in. You can follow a few other tips as well to make AR easy.
Automating your accounts receivable process can save a lot of your time that you can dedicate to something productive. That is why you can consider using a software solution to do the e-invoicing for you. The software can create email templates for you, customize billing frequency, produce and send accurate and timely invoices, keep track of transactions and save details of transactions.
Moreover, the software enables you to manage and keep track of client data very easily. You can collect and store client data like name, contact information, payment frequency rates, or any discount provided.
You will be able to customize payment terms and create your collection plan efficiently through automated AR. It is wise to create a shorter payment time to receive your payments quicker. The software will let you know which accounts are overdue.
The software will also send email alerts to clients and maintain communication so that your collection goes smoothly. The customer can also inform you regarding their payment if there is any delay or of other issues.
In case you cannot reach your client for a long period of time, you can consider getting accounts receivable insurance. This coverage can help you to recover from unexpected losses. You can also include penalties for late payments. You can put it in the initial agreement with the client and thus avoid losing money.
Consider simplifying the payment process for your customer. Introducing different payment methods can attract more customers to your business. Online or digital payment will be the most beneficial as it is fast, secure, and convenient.
Conduct a review of AR on a weekly basis for better clarity and make it a company priority. This analysis will help you to come up with better collection plans and future strategies. You can get good software to conduct the reviews efficiently.