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Accounts receivable management involves your business’s cash flow and operating capital, which can significantly affect the bottom line. This category includes many processes regarding billing, invoicing, and collecting payments.
However, accounts receivable management isn’t solely focused on finances. It’s crucial to have positive customer relations during the process to ensure you can collect what’s owed and continue to have loyal clients. Improving your accounts receivable management will help your business in many ways.
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Use Software for Accounts Receivable
The software options for accounts receivable can help you tackle every aspect of this task. Instead of relying on an employee to do all the minor tasks and risk human errors with transcription or data transfer, using software improves your accounts receivable management.
With software, you can use electronic services like billing and payments. It’s simple to link accounts to auto-populate the relevant information and save your employees’ time, freeing them up for other tasks.
The software can email a bill to a client, allowing them to click an embedded link and pay immediately. There’s less work regarding accepting payments over the phone, in person, or waiting for the check in the mail.
Integrating the software into your business makes implementing some of the following steps, like automation and payment methods offered, much easier.
Using accounts receivable automation is crucial for businesses that want to decrease the chance of human error and ensure the company runs smoothly behind the scenes and for the customers.
On the back end, automated invoicing frees up your employees who would previously spend hours inputting invoice information, printing copies, and mailing them to clients. With automation, the software integrates with your client database and can auto-populate fields, then send digital invoices instantly.
Automation software can also handle the tedious task of following up with unpaid invoices by sending overdue reminders. You can also automate tasks like thanking customers for prompt payments and alerting them to upcoming service needs so they can book future appointments.
Employees can oversee the automation process to ensure the program accurately integrates the customer database and sends timely reminders, but after the initial setup period, this option is hands-off.
Outline Clear Procedures
Clear procedures outlined for your employees and clients can simplify accounts receivable management.
Employees should understand the billing periods and invoice procedures. If you have automation for tedious tasks, employees should understand how often to check in and run reports to ensure everything runs smoothly. They must update the CRM software to guarantee accuracy and keep the business’s documentation in order.
You should detail the payment terms so customers understand each charge and any required deposits. Give information about late fees for overdue invoices so customers can’t claim they didn’t know your policy.
With a clear outline of the accounts receivable process, clients will understand what they need to pay, why, and by what date. Employees will understand the generated reports and can follow up with customers when necessary, ensuring your business has a human touch regarding customer service.
Accept More Payment Methods
Many clients only cut checks once a week or on a biweekly basis. Instead of waiting for their accountant to review the invoice and prepare a physical check, you can accept more payment methods to streamline the process.
Customers are more inclined to pay immediately if your business provides multiple options. They most likely have a preferred payment process, so accepting through these outlets simplifies the process. Some popular payment methods include:
- Credit card
- PayPal and online payments
- Wire transfer
There may be fees associated with some payment methods, like transaction fees with credit cards and online payment portals. You can consider charging the client for the fee or eating the cost to get the money into your account quicker.
Offer Payment Incentives
Payment incentives are an effective way to ensure customers pay invoices promptly. Offer early payment discounts, like a one percent discount if paid within ten days. If the client doesn’t pay during that initial period, they must pay the full amount within 30 days.
You can determine what discounts best serve your company. You don’t want to lose money on each service, but having less money in your account immediately can be more profitable than waiting a month for the full amount.
Customers will appreciate the option to save money, so they might be more willing to pay immediately because the total is less than their budget. Many customers postpone payment because they want to keep the money as long as possible, so a discount is a win for all involved parties.
After establishing a history with a client, you can check their credit and payment patterns to verify reliability. At that point, you can offer credit to them to ensure they stay loyal to your company. Offering credit simplifies the ordering process for the customer and guarantees a regular income for your business, but you need to be strict in granting this incentive.
It’s easy to delegate certain aspects of accounts receivable management to specific employees, but the process works best when the whole team stays informed. The business owner should know just as much as the financial team, while salespeople also need to stay in the loop about clients and who is in good standing.
When everyone sees the business’s financial side, they understand their role in the company. Salespeople can change their tactics based on the bottom line, ensuring they bring in clients with the most profitability.
There’s no need to train all employees on the accounts receivable software or automation process, but they should have access to the reports. Updates about the financial status keep all employees on the same page, working toward the company’s goal.
Final Thoughts To Improve Accounts Receivable Management
Implementing these tips can help you streamline your accounts receivable management to ensure your records stay updated and your team stays informed. Instead of taking on the cost of outsourcing accounts receivable, using these methods to manage the process ensures you can handle it in-house and best track the metrics.