How to Improve Your Accounts Receivable Process and Streamline Your Business Operations

Ensuring your invoices are paid promptly and within terms is an essential item on the ‘to-do’ list for any business that wants to maintain a healthy cash flow position. However, managing Accounts Receivable can be time-consuming, complicated and yield uncertain results, particularly for smaller and mid-size organisations. In this blog, you will find tips that help ease the process, secure some ‘wins’ and streamline your business operations.

Use Accounting Software

Make sure you have dedicated accounting software. The right software can automate routine tasks such as invoicing, payment allocation and reporting. Software can also identify payment issues early on, which allows you to act before they spiral. Automation frees up resources you can divert to other areas requiring attention or boosting productivity. 

Set Clear Payment Terms and Communicate them

Good Credit Management practices should make sure your customer knows when payment is due. Do this by including your payment requirements (due dates, terms and accepted payment methods) within your contracts, invoices, statements and reminder notifications. 

Don’t Delay Sending the Invoice

Easily overlooked but hugely important – ensure the invoice is raised and delivered to your customer promptly and in a format that works for them. The satisfaction curve (the period during which the customer is happy to pay) fades quickly. You want the customer to receive the invoice with the positive impact of the product still fresh in their mind. Delayed invoicing sends the wrong signal and significantly harms your chances of receiving timely payment. 

Follow Up on Overdue Invoices Promptly

Make sure you receive timely payment by using prompt and effective follow-up. Have a robust system to track invoices and send manual or automated reminders through accounting software. Employ CICM-qualified staff, and regularly upskill your people through training so they are well versed in collections best practices. Foster a collaborative approach between accounts and sales teams. During follow-up, be polite and professional, identify payment barriers as early as possible and focus on solutions. 

Offer Incentives for Early Payment

Incentives for early payment can encourage customers to pay their invoices promptly. Consider offering a small discount or other incentives for customers who pay within a pre-agreed timeframe. This can improve cash flow and reduce the risk of overdue payments.

Consider a Collections Agency

Consider outsourcing some debt to a collections agency. They can help recover overdue payments, and often a change of letterhead is required to make the customer notice. Although there is a cost, there are savings in the time and resources needed to collect that debt in-house. 

In summary, improving your Accounts Receivable process and streamlining your business operations can help you maintain positive cash flow and ensure the long-term success of your business. By using accounting software, establishing clear payment terms, sending and following up on overdue invoices promptly, offering incentives for early payment, and considering working with a collections agency, you can improve your Accounts Receivable process and reduce the risk of financial strain.