Accounts Receivables (AR) refers to the proceeds or payments a company will receive from its customers for the products sold or services offered on credit. The term ‘receivables’ points to the money that is due to an organisation for goods and services offered from customers who are yet to pay for the same. Accounts receivables are featured as current assets on the balance sheet.
Businesses require cash to ensure all the activities/operations can run smoothly. Subsequently, the need for properly managing accounts receivables arises to maintain cash flow and guarantee the growth of a business. The following sections thoroughly discuss the effective ways to manage accounts receivables; read on.
Smart Ways To Manage Accounts Receivables In 2023
Following is discussed several ways of managing accounts receivables in 2023:
1. Track Bills
One of the ideal ways to manage accounts receivables is to keep track of bills that fall under AR’s list. Here, business persons or persons appointed for this particular job can conduct bill-by-bill tracking, which can track each invoice.
Next, they can tally with the receipts received from the customers. By following this process, they can easily track accounts receivables, grow a strong relationship with customers, and settle any dispute if it occurs. settle if any dispute occurs.
2. Pay Attention To Long-Pending Bills
The timely realisation of invoices is essential for accounts receivables to ensure steady cash inflow. If an organisation has piles of invoices sitting idle as accounts receivables, it will negatively hamper cash inflow and, in worst cases, turn into bad debt.
Hence, it is imperative for businesses to thoroughly go through the checklist of accounts receivables and stringently take care of cases where invoices are due for a long time.
In such scenarios, most businesses prepare an ageing analysis to pick out long-pending bills and schedule the collection process accordingly. In addition, ageing analysis helps companies track accounts older than 90 days. Thus, business persons can easily track long-pending bills and take actions to unlock the cash tied with customers.
3. Assess Payment Performance Of Any Customer
Another effective method of managing accounts receivables is to assess customers’ payment performance. Payment performance of customers, also known as debtor collection days of receivables turnover in days, refers to the average number of days customers take to pay the outstanding amount.
If a business has higher debtor collection days, it must invest more into the due accounts receivables. On the other hand, reduced debtor collection days mean customers pay faster, and that particular business has enough cash to use. In some cases, the receivable turnover may show low, and the payment performance may be high. This kind of situation indicates customers cleared all dues, but the payment took a long time to get completed. That’s why business persons must track payment procedures periodically, spot customers who have the tendency to make a late payment and plan for them accordingly.
4. Collection Schedule And Follow Up
If businesses can prepare a collection schedule process and regularly follow up the entire procedure, it will help them to convert invoices into payments.
Here, business persons can use ageing analysis to prepare collection schedules for customers who have not paid bills for a long time. Businesspersons can further rely on emailing reminder letters for this collection schedule. Wondering how? Emailing reminder letters with due details can help businesspersons streamline the collection process and follow up with customers.
5. Rely On Internal Credit Control Techniques
To efficiently handle credit management, business persons can set a credit limit on the basis of the credibility repayment capacity of customers.
Businesses can avoid overselling to customers above the set credit limit through this technique. Further, an internal credit control alert system will timely notify overdue bills during invoicing, which will help businesspersons avoid any mishap.
6. Opt For Automated Process
Accounts receivable management is necessary for the faster realisation of sales. For this purpose, business persons can opt for an automated process that helps track bills, ensure faster payments, and improve customer relationships. In addition, an automated process reduces the time and effort otherwise needed in manually tracking and handling details, thus eliminating chances of error that may arise due to all the reasons mentioned.Here, businesses can rely on accounts receivables management offered at Capvel. This online platform offers auto email engagement for various categories, such as customer risk, outstanding payment, etc., efficient customer onboarding with risk analysis, complete control on the collection process and follow-ups and many more.
Manish spent a decade in the finance and banking industry, including a successful stint at HSBC, before founding KredX in 2015. He took his expertise in accelerating capital velocity and created a platform that has become a growth catalyst for hundreds of Indian businesses, big and small. The journey has been triumphant, KredX featured among the top 100 leading global Fintech innovators in the KPMG-H2 Ventures 2017 Fintech100 list and Manish was recently awarded the Entrepreneur of The Year in Business Services at the Annual Entrepreneur India Awards. You can reach him through LinkedIn.
How To Manage Accounts Receivable Effectively In 2023
Accounts Receivables (AR) refers to the proceeds or payments a company will receive from its customers for the products sold or services offered on credit. The term ‘receivables’ points to the money that is due to an organisation for goods and services offered from customers who are yet to pay for the same. Accounts receivables are featured as current assets on the balance sheet.
Businesses require cash to ensure all the activities/operations can run smoothly. Subsequently, the need for properly managing accounts receivables arises to maintain cash flow and guarantee the growth of a business. The following sections thoroughly discuss the effective ways to manage accounts receivables; read on.
Smart Ways To Manage Accounts Receivables In 2023
Following is discussed several ways of managing accounts receivables in 2023:
1. Track Bills
One of the ideal ways to manage accounts receivables is to keep track of bills that fall under AR’s list. Here, business persons or persons appointed for this particular job can conduct bill-by-bill tracking, which can track each invoice.
Next, they can tally with the receipts received from the customers. By following this process, they can easily track accounts receivables, grow a strong relationship with customers, and settle any dispute if it occurs. settle if any dispute occurs.
2. Pay Attention To Long-Pending Bills
The timely realisation of invoices is essential for accounts receivables to ensure steady cash inflow. If an organisation has piles of invoices sitting idle as accounts receivables, it will negatively hamper cash inflow and, in worst cases, turn into bad debt.
Hence, it is imperative for businesses to thoroughly go through the checklist of accounts receivables and stringently take care of cases where invoices are due for a long time.
In such scenarios, most businesses prepare an ageing analysis to pick out long-pending bills and schedule the collection process accordingly. In addition, ageing analysis helps companies track accounts older than 90 days. Thus, business persons can easily track long-pending bills and take actions to unlock the cash tied with customers.
3. Assess Payment Performance Of Any Customer
Another effective method of managing accounts receivables is to assess customers’ payment performance. Payment performance of customers, also known as debtor collection days of receivables turnover in days, refers to the average number of days customers take to pay the outstanding amount.
If a business has higher debtor collection days, it must invest more into the due accounts receivables. On the other hand, reduced debtor collection days mean customers pay faster, and that particular business has enough cash to use. In some cases, the receivable turnover may show low, and the payment performance may be high. This kind of situation indicates customers cleared all dues, but the payment took a long time to get completed. That’s why business persons must track payment procedures periodically, spot customers who have the tendency to make a late payment and plan for them accordingly.
4. Collection Schedule And Follow Up
If businesses can prepare a collection schedule process and regularly follow up the entire procedure, it will help them to convert invoices into payments.
Here, business persons can use ageing analysis to prepare collection schedules for customers who have not paid bills for a long time. Businesspersons can further rely on emailing reminder letters for this collection schedule. Wondering how? Emailing reminder letters with due details can help businesspersons streamline the collection process and follow up with customers.
5. Rely On Internal Credit Control Techniques
To efficiently handle credit management, business persons can set a credit limit on the basis of the credibility repayment capacity of customers.
Businesses can avoid overselling to customers above the set credit limit through this technique. Further, an internal credit control alert system will timely notify overdue bills during invoicing, which will help businesspersons avoid any mishap.
6. Opt For Automated Process
Accounts receivable management is necessary for the faster realisation of sales. For this purpose, business persons can opt for an automated process that helps track bills, ensure faster payments, and improve customer relationships. In addition, an automated process reduces the time and effort otherwise needed in manually tracking and handling details, thus eliminating chances of error that may arise due to all the reasons mentioned.Here, businesses can rely on accounts receivables management offered at Capvel. This online platform offers auto email engagement for various categories, such as customer risk, outstanding payment, etc., efficient customer onboarding with risk analysis, complete control on the collection process and follow-ups and many more.
Manish Kumar
CEO and Founder, KredX
Manish spent a decade in the finance and banking industry, including a successful stint at HSBC, before founding KredX in 2015. He took his expertise in accelerating capital velocity and created a platform that has become a growth catalyst for hundreds of Indian businesses, big and small. The journey has been triumphant, KredX featured among the top 100 leading global Fintech innovators in the KPMG-H2 Ventures 2017 Fintech100 list and Manish was recently awarded the Entrepreneur of The Year in Business Services at the Annual Entrepreneur India Awards. You can reach him through LinkedIn.
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