Inefficient cash flow management is the reason the majority of the reasons fail. According to research, 82% of the small and medium businesses fail due to cash flow problems – either lack of cash flow or efficient cash flow management which over time drains cash flow.  And nothing impact cash flow more than Accounts Receivable and Payable since they manage cash inflow and cash outflow.

If SMEs experience such a high failure rates due to cash flow problems, the odds of success for startups or small business is slim if the latter does not focus on Accounts Receivable or Accounts Payable for optimized cash flow and working capital management.

Accounts Receivable Services by Back Office Accountants:

Fortunately, cash flow can be improved and working capital can be optimized by adopting better Accounts Receivable and Accounts Payable practices. At Back Office Accountants we have been helping small and medium businesses with the same for years now and in this blog, we are going to take a leaf from our playbook and give you simple tips that can level up your Accounts Receivable process for optimized cash flow and working capital management. Read on:

Improved & Modern Accounts Receivable for Better Cash Flow and Working Capital:

Not having streamlined Accounts Receivable is not a bigger problem than ignoring the guidelines. The majority of the business does not follow the guidelines to chase their sales goals – this especially happens in small and medium businesses. To sell more, businesses do not follow Accounts Receivable policies, do not negotiate and even extend their credit lines which result in delayed or even abandoned Accounts Receivable collection.

So essentially improving Accounts Receivable is a two-part problem – revamping the AR process with new guidelines and then following them to the tee. So if you are a business looking for new and improved Accounts Receivable proves following tips, you can be considered implementing the following practices:

Approvals based on Credit Worthiness:  The first step any business must take to improve their Accounts Receivable is to grant credit based on stringent credit guidelines. Simple credit history check can help businesses detect potential cases of delayed or unpaid credit. These credit guidelines must also be devised based on the customer and specific industry domains.

For example, the credit history of a prospective new customer looking for large volume purchases must be evaluated before granting a credit line. In cases of a new customer looking for low volume purchases simple internal scorecard and evaluation could suffice.  Similarly, you can adhere to different guidelines based on the industry domain since risk can vary based on these domains. But all these processes must be completed in specific time frame businesses have their timelines to deal with.

Manage your Master Customer Data:  Data management errors are common in an Accounts Receivable Process which can over time result in a delay in collections. Also when you adopt new credit measures, it is important to have all the details of the information that is agreed upon. Credit limits, discounts, extensions, payment terms, quality measurements, returns, with detailed and updated customer information must be accurately reflected in the database. To make this possible, businesses must centralize their data, perform regular audits, document the changes made in the process and take special care about the data accuracy.

Adopt e-invoicing and offer multiple payment methods: E-invoicing simplifies the whole invoicing process and helps you adopt automated Accounts Receivable processes for improved tracking and performance. E-invoicing also helps businesses get away with snail-paced paper-based invoices which suffer a high risk of getting lost or misplaced leading to delayed collections. E-invoicing enables you to send timely invoices, reminders and also makes it possible to track them for follow-up. There are plenty of invoicing apps that cater to business needs based on your requirements and budget allocation.

Another reason for late payments (at least what clients say) is the lack of payment options. Gone are the days you have to stick to limited options. By adopting e-invoicing and choosing electronic funds transfer system with multiple options, you can help your clients make swift payments.

While granting approval based on creditworthiness for the clients can drastically cut down the chances of late or default payments, maintaining a customer database helps in perfect execution. E-invoicing and offering multiple payments further improve the collection process and free the cash struck in account books. While a customized AR process, need much more

So, how Back Office Accountants can help?

The above three tips have helped many businesses improve their AR process, all these businesses that noticed improvement was already equipped with a dedicated AR department lead by specialist accountants. Every business is different so are their clients, cash flow requirements, their accounting expertise and also their budget.

So any business that is aiming for improved cash flow and working capital needs customized Accounts Receivable Services crafted and executed by Accounts Receivable experts like Back Office Accountants. With a team of industry veterans who are equipped with advanced accounting tools and software Back Office Accountants has been providing Best Outsourced Accounts Receivable Services for years now. If you are a small and medium business looking for a back-office accounting firm to outsource your Accounts Receivable for improved cash flow, you can contact us here: