How to manage accounts receivable efficiently

How to manage accounts receivable efficiently

How to manage accounts receivable efficiently

Accounts Receivable of any firm is basically when you do things on credit. Many firms have this practice with old and trusted clients and credit is given based on trust in the professional relationship. However, for a start-up or a growing business, this area may become problematic if the receivables go beyond a certain limit or exceed than normal.

If your accounts receivable are high, it creates a pressure on the cash flow in the firm. Hence it becomes very necessary to clear the accounts receivable as soon as possible. Keeping this goal in mind, here are our top picks on how you can find a solution to manage this area.

1) DSO:

A very common metric used by many firms is the Days Sales Outstanding. Various parameters are set by companies for standard payments. You can set a limit for collection of the receivables that fits the needs of your company. However, we would suggest you to be careful in doing so, as this period you set will influence your cash flow.

2) Proactiveness:

In many firms, this is a common practice that they wait until the very last minute! Instead of carrying on with the typical approach, it is always better to inform your clients whose accounts receivable are due, well in advance. It grants you and the client sufficient time to make the necessary arrangements. Also following up with such clients is extremely crucial! We should suggest that you keep a record of these follow-ups in a written communication manner for future use!

3) Discounts:

Money is ultimately everyone’s concern! The firm wants profits and the client wants less money to go out of his pocket! To encourage your clients to pay, you can offer various “early bird” discounts, that is you can offer to reduce the cost a little if the client is paying up immediately! But do not give discounts that you can’t afford!

4) Policy:

Setting up a structured approach around your accounts receivable is very important. While developing such a policy keep in mind various aspects like the track-record of the customer in clearing his receivables, the credit limit that is set by the firm, time limit for collection, etc. This policy will act as your roadmap!

5) Tracker:

An invoice tracker will help you identify the pending and cleared invoices! You can use various parameters to classify these invoices. For example, you can make slots according to the timeframe of pending invoices; that is invoices that are pending for above 90 days, 60 days, 30 days and so forth. This will make it easy for you to get an overview of the pending and cleared accounts!

At BFAG we provide financial service solutions to start-ups as well as established firms. Our accounting services will assist you in an efficient way to manage your account receivables! Get in touch today to know more about our services!
Contact us:
info@bostonfagroup.com
Bangalore:+91 80 2572 4800
USA: +1 6099377291
Pune:+91 7420061235
Visit our website: www.bostonfagroup.com

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