Did you know that by optimizing your accounts receivable workflow, your cash flow can be boosted? Streamlining your processes and utilizing technology helps with faster payment cycles, fewer mistakes, and improved financial forecasting. Let's start with some best practices for improving your A/R - from invoicing to payment.
If your business is in a situation where goods or services have been provided, but your customer has failed to pay their invoice on time, it's up to your accounts receivable team to follow up. Your A/R department, however, can only do so much to ensure that your business receives the payment it deserves and maintains a healthy cash flow. It's crucial to provide a detailed process for escalating past-due invoices beyond accounts receivable to collections.
When you're growing a business, a late-paying client can be frustrating. You have to dedicate time and resources to figure out what happened and why. You have to pull yourself together enough to have a conversation about money - something that's not easy for many people. The most important thing to remember is that your business fulfilled its part of the deal, and now your client owes your business.
With the "unprecedented" events of the past few years, businesses are looking to become more efficient in all areas of their organizations. An area that is often overlooked due to its manual processes is accounts receivable. Even though payments by check have declined since 2019, thirty percent of B2B clients are still writing checks and sending them in the mail. Automating A/R has the potential to create a smoother, more dependable cash flow.
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.
Accuracy and details are crucial when invoicing business clients on retainer or for goods or services provided by your company. In fact, there are some attributes that can be added to invoices to prompt early payment or at least reduce the risk of late payments.
As accounts receivable (AR) begin to fall delinquent, your business expenses could fall delinquent as well. With every late-paying client, cash flow for payroll, rent, or other vendors falls short, threatening your company's bottom line and growth. The effectiveness of your accounts receivable department may be one of the most important measurements to determine the success of your business.
The recent Silicon Valley Bank crisis sent ripples through the world of small businesses, startups, and venture capital. Thankfully, the crisis was mainly thwarted by getting bailed out and addressed by calls for regulation by the Biden administration. But it set enough investors on edge to recognize that it's not the first crisis to affect businesses, and it certainly won't be the last.
When your business has a late-paying client, follow-up calls must be handled quickly and with conviction. Late or non-paying clients cause your business to write receivables off as bad debt, and they could cause the deterioration of your business relationships. Or you could escalate to a professional B2B collections agency that values your business relationships and your cash flow.
As a business owner, it's important to stay on top of your accounts receivable, especially when it comes to business-to-business (B2B) transactions. Accounts receivable refers to the money that your clients owe your company for goods or services that have been provided but not yet paid for. B2B accounts receivable management can be a bit more complex than consumer (B2C) accounts receivable, so it's important to understand how to manage your accounts effectively.
