Accounts receivable is an important task for your business. It’s also a big task, one that can eat up a lot of your time if you let it.
If the idea of accounts receivable management is getting you down, take note: There are many ways you can manage accounts receivable more effectively and efficiently in your firm.
1. Develop a Credit Policy
Who do you extend credit to? It’s an important question to ask when it comes to managing accounts receivable. If you extend credit to everyone and anyone, you’re creating problems in the accounts receivable department.
First, your team may not be able to keep pace with all the new account requests. They’ll most definitely have their work cut out for them when it comes to managing all of these accounts. And, if your credit policy is lax, you’ll probably extend credit to some customers who will cause you headaches later on down the line.
Review your credit policy and put in place criteria for new customer accounts.
The credit policy should also include information about what happens if customers can’t pay their bills, as well as how you should proceed with repayment plans, bad debts, and other aspects of accounts receivable.
2. Automate Reminders
If you’re late paying your cellphone bill, you might receive an email or a text message from your phone provider, reminding you about the overdue bill.
Did you pause to wonder how they knew to message you just a couple of days after the due date passed? Did you imagine a sprawling accounts receivable department and team members carefully combing accounts, then sending out messages?
Probably not. The message was automated! Software combs your accounts for outstanding bills with a due date that’s close or has already passed. The program then generates the message and sends it out to the customer. These auto-reminders save you and your team a lot of time. Since a gentle nudge is often all the customer needs, you’ll get the overdue account settled in short order!
3. Use a Carrot/Stick Approach
You can manage accounts receivable more effectively if you accept your customers will respond to a carrot/stick approach. With this method, you offer the customer incentive to pay early—and “punish” them if they pay late.
You may already have provisions in place for the “stick” portion of this management technique. Most businesses charge interest on overdue accounts. The threat of additional charges makes customers more inclined to pay by the deadline. They don’t want to pay more than they have to!
Fewer businesses have a “carrot” for their customers, however. With this strategy, you offer your customers a reward for paying their bills early. The most common way to do this is to offer a discount on the bill if it’s paid before a certain date. And it helps: Customers offered an early payment discount usually pay sooner!
4. Get a Helping Hand
If you truly want to manage accounts receivable more effectively in your firm, the best thing you can do is get a helping hand. Your in-house team members are good at what they do, but they may be overwhelmed by the sheer volume of work.
Outsourcing accounts receivable management has many advantages. You’ll realize cost-savings and reduce the time it takes to get paid, improving your cash flow. The provider’s team is using the latest technology and has the training to manage accounts receivables in the most efficient way possible.
If you’re struggling to manage accounts receivable, try one of these methods to improve your process.