Listed as an asset on financial statements such as the balance sheet, accounts receivable is an important resource to your business. It's considered an asset because it can be converted to cash if collected within the payment terms set in your client contracts. If it's not collected in a timely manner, it becomes a drain on company resources. Policies and procedures must be documented to increase the success of these collections.
An A/R policy will define the procedures and responsibilities associated with the process of collecting what's owed to your business. A typical policy includes:
When implemented, the accounts receivable policy will help increase cash flow to your business.
Consistency.
With a documented procedure and clear expectations, your accounts receivable departments work in concert to prompt early and timely payment. Or, if late payments become a problem, there are defined processes to bring client accounts current.
Consider the policies that are already in place and define more from there. If your business invoices or runs aging reports on a certain day of the month, add that to the policy. If your business has credit standards or runs credit reports on your corporate clients, add that to the policy.
If you don't know where to start, download our Accounts Receivable Collections Policy Template by clicking the green button below. Let us know if you have any follow-up questions. We're here to help.