Higher sales and revenue don’t necessarily mean smooth cash flow when the account receivable is ineffective. A business that generates increased sales every month may still encounter cash flow problems when the accounts receivable is slow, and collection strategies are not on point.
AR issues can sometimes be minor flaws to deliver the damage; even minor oversights will significantly impact the cash flow stream of a business. Say, one of our clients at Back Office Accountants still had to face cash flow troubles that halted their operations even after they had their best month in sales. The reason for the trouble is unoptimized collection schedules caused by lengthy payment timelines and heavy inventory.
Unsurprisingly, all the cash flow problems will eventually have their root in the efficient Accounts Receivable process. But how to fix these AR problems and rescue the cash flow? With the inputs from our Accounts Receivables experts at Back Office Accountants, we have listed four proven AR tips that can help fix these cash flow problems. Read on to know them:
4 Accounts Receivable Tips to Rescue Your Cash Flow:
Track Accounts Receivable from the get-go: What gets measured and gets managed is the adage that aptly suits Accounts Receivable. With so many intricate processes, no one can get a clear idea about the process, and when businesses rely on manual AR, they lose their entire sight of the process. The simplest and most effective tip that could step up your AR is to segment, streamline and track the whole process for greater visibility.
Moving away from manual spreadsheets and investing in simple AR software highlights the outstanding payments for you to focus on. It simplifies access to all the accounts, identifies mistakes helps you catch lapses in your process. More importantly, it increases visibility and gives you greater control over the process.
Maintain an accurate database & evaluate terms regularly: Credit terms are instrumental in creating an efficient cash flow that doesn’t dry up when you need it the most. At Back Office Accountants, we verify the client’s industry, payment history, background and other relevant information to assess creditworthiness before recommending the credit terms.
These credit terms must be reviewed regularly according to current market and economic conditions according to the cash flow requirements. To enable this, we also maintain a master customer database that stores updated information – credit limits, payment terms, return policies, and tax rates to ensure the proper execution. Choosing the correct credit terms and providing accurate information can help businesses eliminate risk and optimize their AR process. WE advise every business to try out this process to improve their collection strategy.
Have a centralized customer portal: Most solvable mishaps happen in AR due to a lack of communication. Having empathetic customer service does help solve communication issues, but preventing this from happening altogether is even better. At Back Office Accounts, we solved this problem by setting up streamlined customer portals where customers can view and pay invoices without contacting the team. Given that they are integrated with Accounts Receivable software, the customer portal can be customized per the specific requirements of both parties to streamline further and simplify communication.
Automate invoicing process: Manual invoicing is the most time-consuming and error-prone process, responsible for 80% of the AR issues that create cash flow issues. While it may not directly impact the cash flow, it creates different types of problems that eventually burden the AR team, robbing precious time which could be spent in optimizing AR.
Automating invoicing minimizes time spent, reduces human error, improves the transparency of the process and improves the ability to debug the issues that plague the AR process. It also enables you to schedule payment reminders, automate communication and create synchronized strategies that levels-up the entire process.
There is only so much simple tips can do to improve your cash flow. Any consistent upgrade will need optimizations from ground-up. But all the above tips – AR automation, assessing creditworthiness, and setting up integrated customer portals are resource-intensive tasks which can be challenging for businesses with limited resources.
At Back Office Accountants, we are equipped with the right tools and accounting personnel who can assist you at every step of your AR process. Suppose you are looking for an outsourcing partner. In that case, we also offer end-to-end Accounts Receivable Services that can transform your AR from the ground up to ensure a smooth and consistent cash flow per the business’s specific requirements. In addition to Accounts Receivable, we offer Accounts Payable, Credit card reconciliation services and end-to-end back-office accounting services for businesses across versatile industries. You can contact us here: https://www.backofficeaccountants.com/