Decoding Accounts Receivable for Businesses

Introduction

Accounts receivables are the payments your customers owe you for your products/services availed on credit. From the customer perspective, it refers to the amount you owe the business you purchase from. From the business owner’s perspective, it implies the amount your business is due to receive for a service availed or a sale made. It is vital to ensure a sound accounts receivable management system for a healthy cash flow. A few reasons to focus on your receivables are a healthy cash flow, good customer relations, and bank reconciliation, etc.

Save time and money by avoiding mundane manual tasks and reducing follow-ups with the involved stakeholders. An inefficient AR management can lead to a negative cash flow. Maintaining perfect accounts receivable workflow helps your business flourish without any hiccups. With several auxiliary functions involved, embracing automation is almost a necessity, to thrive in the competitive business environment.

Why is Accounts Receivable Critical for Businesses?

Reports reveal that at least one-third of small and medium businesses plan to turn to automation software by 2025. In these times when there are delays in business payments, here is what your business can do to stay ahead with the times -

• Know your customers well
• Implementing positive and negative incentives
• Crystal-clear credit policies

General Steps in an AR Process‍

• Enforcing Credit Policies: Creating an enforceable action plan will help you decide how to handle the situation in case of delayed payments, bad debts, etc.
• Providing Customer Invoices: Let your customers know how much they owe your business for their purchase. That documentation is called an invoice and consists of all payment-related information.‍
• Tracking Your Accounts Receivable: There are fair chances that your customers may forget their payment deadlines.Look for automated solutions to beat the repetitive nature and manual efforts involved. ‍
• Creating an Account for Receivables: On nearing the payment deadlines, you might want to distinguish between payments received and not received, to record all sales made.

Factoring Receivables at a Glance

Factoring receivables refer to the sale of accounts receivables, and it is recommended if your business is tight on cash flows. However, it is more of a short-term benefit than a long-term one. In simple terms, here are a few benefits of accounts receivables factoring -

Gains

• An Improved cash flow.
• Enjoy improved financial status.
• Your business stays in your control.

Benefits of AR automation

• Real-time Tracking: Make smart business decisions through real-time tracking via several KPI metrics, and let your business thrive.
• Get Timely Reminders: Why worry about manually reminding customers, when automation can help you with that? You do not have to worry about it anymore!
• Seamless AR Dashboard Analysis: You can perform number crunching without any trouble! With real-time data at your fingertips, you can measure your business’s financial health, make the right forecast predictions, etc. ‍
• High Security and Accuracy: When you are not using papers or e-mails, your business is safe from issues like data breaches, non-GDPR compliance, fraudulent invoicing, etc. Also, manually performing repetitive tasks can lead to human errors. Automation can help save you loads of rework time and effort.

What Finance Leaders Should Keep in Mind?

Of course, AR comes with its own set of challenges, such as declining productivity with surging transactions. With increasing digitalization, there are now newer ways to achieve business/operational efficiency. Creating roadmaps, for a seamless digital transformation, has proved to be successful for several businesses. It brings several benefits such as -

•  An uninterrupted customer/client onboarding process.
• Receive hassle-free payments from multiple modes. 
• Also, provides flexible payment methods to the payers. 

Also, adopting a modern AR management practice can help in crucial AR tasks such as reporting. An AR report helps your team keep abreast of your business’ cash flows, working capital and other crucial financial information. The AR reports generated using sophisticated technology are invariably higher on the accuracy scale.

There are different kinds of AR solutions available in the market. You can choose between comprehensive software suites and autonomous ones, based on your budgetary resources.

Best Practices Collecting Accounts Receivables

Here are a few ideas to efficiently streamline your accounts receivable processes in 2022:‍

• Implementing Credit Policies: A strategic credit policy means you will not have to endure customer laxness, delayed payments, etc. Set the criteria, terms, and conditions to filter out the bad debtors. Many solutions allow you to deal with late payments and unpaid invoices smoothly.
• Do Not Mix-n-Match Your AR Automation Solutions: It is not new that the accounts receivable process involves multiple activities, and hence, it is highly recommended to stick to a single tool to meet all your AR needs.
• Prioritize Customer Comfort: Essential to ensure your customer does not have any trouble with the invoices. It helps create a favorable payment system that permits timely payments. 

Conclusion

Accounts Receivables are critical to a business’s healthy functioning. Overcome AR issues such as invoice loss/misplacement, payment inconsistencies, etc., and achieve more in so little time! Let your business flourish with our automated AR solution, designed to eliminate your day-to-day hassles. Excited? Check us out, sign up for a demo with us now!