Best Practices for Managing Accounts Receivable

The process of keeping track of and controlling client payments is known as accounts receivable management. In order to prevent outstanding invoices from turning into bad debt, it entails keeping track of customer invoices, retrieving overdue payments, balancing accounts, and resolving payment disputes.
A daily task for many controllers and accounting professionals is managing accounts receivable. They cannot, however, ignore it because the collection of outstanding receivables is critical to the overall financial health of their operation and the company. Whether you handle accounts receivable (A/R) for a small business or a large corporation, effective management of AR demands constant attention and knowledge of best practices.
These essential areas listed below should be taken into account when managing your company's accounts receivable process in order to optimize profitability and establish a productive system that preserves client relationships.
Set Standards For Acceptable Credit
Better business planning and financial certainty are predicated on the establishment of explicit standards up front for credit granting. This entails determining credit terms and payment schedules, defining credit limits to reduce the risk of excessive outstanding balances, and carefully assessing a customer's creditworthiness.
Be Clear About Your Payment Requirements And Deadlines
Without explicit payment deadlines, timely payments are not feasible. When expressing payment requirements, be sure to include payment interval terms, like "due upon receipt", to make it clear when payments are anticipated. Additionally, give details on approved payment methods, such as bank transfer procedures and online payment options. To provide an extra layer of security, and by putting in place automated systems to remind people when payments are due this can reduce mistakes and past-due bills.
Make It Easier To Pay You
Customers experience less friction when the payment process is made simpler, which encourages timely payments. Offering online payment portals where clients can make electronic payments is the best way to accomplish this. By providing a range of payment options, including credit cards, electronic funds transfers (EFT), and mobile payment apps, one can accommodate a wide range of preferences and streamline the payment process. From a business perspective, think about automating payment processing to streamline operations and eliminate error-prone manual data entry.
Be Proactive And Accurate With Collections
To encourage clients to make their payments on schedule, think about implementing automated alerts and reminders. Your A/R management teams can focus on more difficult tasks with the time and energy saved by using automation software to handle this for you. Reduce disputes and promote accurate accounting by implementing a system that automatically matches payments to associated invoices.
Improve Communication And The Understanding Of Your A/R With Analytics Reporting
By putting your accounting system online, you can access real-time analytics and data, which improves forecasting and decision-making. Online platforms facilitate communication between internal teams and customers, and they give instant access to reports and data that speed up troubleshooting and collaboration.
Resolve Payment Disputes Early
It's critical to resolve disputes with customers in a proactive manner when handling their payments. Deal with a customer's balance dispute as soon as possible.
This could entail looking into the terms of the initial purchase and payment, seeing if a payment has been applied incorrectly, or speaking with the client to find out if they are contesting the invoice because they are dissatisfied with the good or service you rendered.
When conflicts are resolved in a timely and professional manner, a mutually agreeable solution is typically found.


