It is unfortunate but many companies do not have a specific strategy in place when it comes to managing accounts receivable. And without a great plan, these companies often lose more money than they should. This is unacceptable in our opinion, and it should be unacceptable to you too as a business owner.
Instead of continuing to make foolish mistakes, it’s best to strategically manage accounts receivable so nothing slips through the cracks any longer. If you want to stay relevant, and continue to be a top performer in your industry, you’ll need to master A/R management and learn how to properly manage accounts receivable. These strategies work in any industry.
7 Steps to Successful A/R Management
- Communicate with your customers – first and foremost, proper communication is the backbone of A/R management. When you first get into business with a company, let them know that they have to honor the terms of their agreement and pay you on time, every time. Your business needs to receive payments on time so that it can thrive. If you let customers have too much leeway, and allow them to pay whenever they please, you aren’t doing a very good job of managing accounts receivables.
- Tracking results – pay close attention to your invoices and track the results. Look at the aging. If a customer has gone too long without paying a bill, make it a point to contact them immediately. Let them know that they have an open invoice. And make sure they send out a check or make a payment right away.
- Make sure your accounts receivable staff is on the same page – unfortunately, when dealing with multiple employees, they will all have their own vision for the way things need to be done. In an effort to have your A/R department working on the same page, you must create a clear vision for the entire staff.
- Create a robust process – when you have a robust accounts receivable process in place, the staff will quickly recognize when there is a problem. And a robust system has the ability to resolve problems quickly. Plus, if there is a potential dispute from one of your vendors, you’ll easily be able to prove that they owe you for the disputed invoice in question.
- Continue improving – no system is ever perfect. That’s why it’s always wise to continue improving your accounts receivable management process. By working on improving your process, you’ll eliminate errors and make the process run much smoother.
- Automate repetitive tasks with technology – today’s technology can automate repetitive tasks quite easily. Continue to upgrade your A/R management system to make sure that you have the latest and greatest technology at your beck and call.
- When all else fails, hire a collection agency – if it seems impossible to collect a payment on your own, a commercial collection agency can handle this for you. Quite frankly, having a collection agency acquire payments on your behalf is better than getting nothing at all. You’ll appreciate the services that they provide.
Use these seven steps to optimize A/R management.