Accounts Receivable is the revenue owed to the company from the customers for the goods and services provided. In accounting, it is classified as an asset and is simply defined as the cumulative account of all the pending payments for the services delivered.

The lifeblood of every business, Accounts Receivable is the positive end of a cash flow cycle for a business, it’s the largest asset that is responsible for paying the bills, salaries, expenses and fund the growth for a business. And yet the majority of the small and medium businesses end up strapping their own money in their balance sheets and wreck their cash flow due to with sub-optimal accounts receivable process they adhere to.

From difficulty in matching payments to invoices, invoice delivery problems, limited payment options, request for extension of terms and conditions form customers to outdated information, small and medium business can face a slew of problems in managing their Accounts Receivable process effectively. If you are a small and medium business in the same boat the blog is for you.

Having helped hundreds of small and medium businesses streamline level-up their AR process with our Accounts Receivable Services , our team at Back Office Accountants have identified key areas that are responsible for reduced efficiency in AR collection. And here are 3 simple tips that can help drastically improve your Accounts Receivable collection:

  1. Incentives and payment plans – Providing incentives for small and medium business can be a tough ask but it is one of the easiest ways to ensure a considerable share of early payments form your clients. Having a discount plan for the early payments makes it an attractive option for clients to make payment early and it is a win-win for both the parties. However, it must be kept in mind that the discounts and incentives must be designed carefully according to the industry sector to ensure it doesn’t significantly impact your bottom line.

Similarly, as for clients facing problems with cash flow and need extension, offer a customized and flexible payment plan that can help them pay their outstanding. This can help you with your collectables and builds loyalty that helps you in a longer run. Just make sure you have these additional payment plans in writing with clear and specific instructions regarding future transactions.

  1. Put a strong foot on invoicing and collections: The first step to ensure on-time collection of your payment is to ensure that you are your business are in the same page concerning the payment dues, deadlines and methods of payment. And going an extra mile on the involving and collecting efforts is the best way to do so. This can start with mastering client records and learning more about the clients and store it in your CRM to help you down the line if things go awry in case.
  • Every single bill, notice, statement that is sent out to your debtor must contain updated information on payment particulars- amount, due dates, and repercussions.
  • Given majority of the clients tend to pay the bills in the order of arrival, it pays to send the invoice as early as possible to make it easy for the clients to plan and make payments on time.
  • Make calls and keep making calls for collection – It can be easy to postpone the collection calls but over time it can hurt your collection efforts. A business does expect calls and following-up regularly can put you up in the pecking order for payments.
  1. Diverse client base – Working with a limited set of retailers of a particular sector can stretch out the collection cycle as large retailers typically have wide payment window. Having a diverse set of client base both in terms of volume and industry sector is a fair practice since it guards you against being vulnerable, in the event of an economic downturn in a particular sector. So aim for a diverse set of client base with comfortable payment terms and conditions. If you are primarily working with large businesses, aim for small businesses in diverse sectors to ensure a healthy cash flow year long.

While having a diverse client base is depends on a variety of other factors it does help you improve your collection process especially during unpredictable downturns like the one we have recently experienced. On the other hand, streamlining the AR process with a focus on invoicing, collection, discounts, incentives payment plans can have a significant impact on the levelling-up your Accounts Receivable process and thus improving your cash cycle and business growth. In most cases, the challenges faced by a business to improve their collection can be diverse that need expert help from Accounts Receivable Professionals

Being one of the best remote accounting firms in the market, Back Office Accountants with our expert Accounts Receivable Services has helped all types of businesses leverage the true power of an efficient a streamlined Accounts receivable process and can help you too. If you are a business owner looking for a complete overhaul of your Accounts Receivable process or need help to a level-up specific segment of the AR cycle, Back Office Accountants can help you with our professional and customized Accounts Receivable Services. You can contact us here: