Accounts Payable or Accounts Receivable, we have noticed that every accounting team has a certain way of getting things done. The workflows and processes that were handed down from their predecessors are duly followed and most of the time these accounting principles tend to be outdated and evolve into myths; thus resulting in a sub-optimal accounting performance.

Accounts Receivable is not an exception to these myths. As a remote accounting firm specializing in Accounts Receivable, we often find our clients being victimized by these Accounts Receivable myths that inadvertently come to affect their cash flow. In this blog today, we identify 4 common Accounts Receivable myths that you as a business must nip in the bud for an optimized cash flow.

Myth 1: Late Payments are solely the fault of the customers:

Late payments are not the exception but a norm when it comes to Accounts Receivable. Naturally, every start-up entrepreneur will surely be in for a rude shock when the Accounts Receivable collection is consistently late. According to research, more than 90% of businesses experience late payments. So it is natural to make the customers completely responsible for the late payments – a myth in the Accounts Receivable industry.

In reality, most businesses are not proactive in AR collection management. In the chase for more sales and revenue, credits are generously extended without adequate credit review which comes to hurt the business in the longer run. The lack of, early-bird incentives, efficient follow-ups, favorable terms or revision of terms further makes it easy for late payments to happen. So late payments are not the customer’s fault in the majority of cases, businesses share equal blame especially if they lack an efficient Accounts Receivable process.

Myth 2: ERP is all one needs to manage an AP:

No matter how advanced an ERP system tends to be, Accounts Receivable being an eclectic process in itself, cannot be efficiently managed by it. Though ERP systems offer the AR module, the majority time it lacks the required functionality, insights and even automation offered by dedicated AR tools. For starters, ERP falls short of providing dispute resolution, and advanced reporting and will further complicate the process by demanding outside applications.

ERP systems are not conducive to invoice to cash workflows and result in making it harder for implementing AR collection strategies resulting in process inefficiencies. Any business that is looking for an efficient AR system with faster AR collections is better served by dedicated AR functionality offered by cloud accounting tools.

Myth 3: Accounts Receivable and sales cannot work together:

As said above, sales, to improve revenue grant credit terms that are too generous, ultimately leading to late payments or reduced profits. It is common for sales and AR teams to be loggerheads with each other but with the right vision and direction, they both can work together for improved overall profit. At Back Office Accountants we suggest the AR team take the lead and ensure credit terms and payment schedules are perfectly communicated and adhered to by sales teams. By providing a centralized platform, sales teams and AR teams can improve their collaboration and communication for seamless and smooth AR management.

Myth 4: Accounts receivable management is easy:

Accounts Receivable is the lifeblood of every business. Playing a critical role in the positive cash flow cycle is the most common pain point for every business, especially small and medium ones. More than 90% of the business-facing late payment issues will also reflect how challenging Accounts Receivable can be. And yet most businesses underestimate the AR process and gradually face cash flow problems and eventual cash crunch as their money keeps getting tied up in their books.

If you are a start-up or a small and medium business that is aiming for smooth and seamless operations and a solid foundation for growth we advise you to focus on busying a robust Accounts Receivable Process. That said, if you lack the right resources or AP expertise, outsourcing Accounts Receivable is a far faster, convenient and more economical alternative.

Outsource Your Accounts Receivable to Back Office Accountants

As a trusted remote accounting firm specializing in Accounts Receivable, Back Office Accountants is equipped with the right technology stack & AP resources led by certified CPAs to help you build robust Accounts Receivable Processes. If you already have an AR process but need more assistance, our experts can work with your team to fill that gaps and pave way for an optimized AR process in line with cash flow goals. For outsourced Accounts Receivable Services you can contact us here: