Working capital challenges and cash flow problems are the most common woes faced by small and medium business all around the world. While small business owners find themselves juggle around multiple responsibilities to keep the business running with steady sales, cash flow problems can plague the business if an efficient Accounts Receivable is not set in place.

Common AR problems faced by businesses:

While a small business may have it easy while starting to manage the accounting process, as they grow they are met with a slew of challenges which when left unsolved can lead to a liquidity crisis. Having helped many small and medium businesses with our outsourced Accounts Receivable Services, our accounting team at Back 0fffice Accountants are well aware of these common problems and here are the most common ones:

  1. Failure to collect the payments on time within agreed-upon conditions.
  2. Steady increase in the number of unresolved balance transactions.
  3. Poor performance of billing systems, ERP and CRM technology platforms.
  4. Increased invoicing and collection errors by the AR department.
  5. Strained relationship with customers due to inefficient AR practices.

It is quite easy to follow an optimal Accounts Payable process since it mandates payment by set due dates, it must be paired with a diligent AR system to ensure proper cash flow and revenue management. Be it for the smooth running of your business today or growth of the business tomorrow, it is important to have a streamlined Accounts Receivable Process in place. However, it is not easy to enforce a trusted and efficient AR process unless you outsource your Accounts Receivable process. But you can easily improve the existing framework by adopting a few tried and tested best practices for Accounts Receivable Process.

As one of the most trusted remote accounting firms in the business offering best Accounts Receivable Services for small and medium business, we have strategized, test and execute AR practices and here are the below ones we found to be most efficient in helping out small businesses:

Timely invoicing and follow-up: Businesses often fall into the lazy practice of procrastinating the invoicing which can and will cause your problems over time. The best time to send an invoice is immediately at the time of delivery, with payment reminder to the customer. But you shouldn’t stop it there, build a follow-up system that automatically sends a reminder to the past-due customers. If the situation does not improve do not shy away from having a conversation as this can help you understand their problem and take necessary measure like setting up a smaller payment schedule. Remember, the longer the payment takes, the lesser are the chance of receiving the due payment. So, don’t skimp on timely invoicing and follow-up.

A consistent and streamlined billing process:  Though billing may seem like a straightforward process, business often make mistakes in this area triggering in a domino effect that results in payment delays and disputes. Errors caused by inaccurate data, failure to generate invoices on time, the complicated payment process may result in confusion, result payment delays and strained relationships. Having a streamlined invoice and billing process where your team have clear set-in procedures to cater to every possible problem, induces efficiency and gives a significant boost to your process. But streamlining invoicing and billing is a massive work-up and how do you do that? Read on to the next points:

Automate your AR process:  Now that we understand how important quick strained to invoice and bulling process and payment follow-up is, now is the time to understand that quick billing and communication can be two mutually exclusive events if a business is adhering to manual AR process.

Businesses with manual AR process are estimated to only spend 20% time in communication because most of the time is spent on a manual process which can be marred with errors and delays. On contrary, businesses that automate AR spend more than 60% time on communication and follow-up, naturally, gets more done in less time. Since every step of automation has to supported by efficient systems in place, Automating AR streamlines the entire process, accelerating the invoicing and billing give more time to focus on communication and follow-up.

Automating AR quickly solves the streamlining of billing and invoicing but at best is a general practice. There are many businesses which fall short of extracting best results from automation due to lack of proper information. That said, our next blog will deal with the necessary practices you can put into practice to extract more for automated AR process and you can find it here. If you are looking for more details on about practices or in need of Accounts Receivable Services, then you can contact our Accounts Receivable specialists at Back Office Accountants here: