Top 5 Tips for Optimizing Your Accounts Receivable Process in the Year 2020

Top 5 Tips for Optimizing Your Accounts Receivable Process in the Year 2020

Whenever a company sells a product or renders service to their customer, they can either demand the payment immediately at the time of sale or can provide credit to the customer so that they can pay later. 

If the customer clears the payment immediately, it is recorded in the account books, and the matter is closed. But if one opts for the credit option, then the account receivable process starts. 

What is the Account Receivable Process?

Accounts receivable refer to the credit that you have provided to your customers. In simple terms, it is the money that your customers owe to the business. They are also called as the corporate I Owe You (IOU) transactions. 

Generally, the IOU transactions go smoothly with the customers, and the amount due for services provided is received in time. But there are a few tested tips that you must follow for optimizing your Account Receivables Process in the year 2020. These tips can make the process faster that will help you to grow your business. 

5 Tips for Account Receivable Process:

  1). Make a Plan for Collection

A well-developed collection plan can help you to go smooth with your account receivable collection process. Several successful companies develop a collection plan to retrieve due payments on time. The collection plan includes making invoices for customers at the correct time. Some customers are sent bills bi-monthly and some get it weekly. However, it relies on the terms and conditions of the business agreement. These are collectively called Accounts Receivable Services.

  2). Record all Charges/ Expenses timely

This is another tip that you should follow to organize and maintain your account receivable collection. Record all receipts, revenue, orders, and service requests in your books as soon as they arrive. This way you can make a permanent record of them in your system.

The record can be used to create your upcoming invoice. This will help you to track the number of invoices that you need to create and send to the respective customers. If you distribute the invoicing work to certain staff, they will be able to organize and prioritize the tasks which need completion.

  3). Encourage Early Payments by Offering Good Discounts

The best part of the account receivable collection process is the early receipt of due payments. When payments are received on time, and consistently, then the company can easily handle the day to day operations. While if the payment gets delayed, the business can suffer losses in terms of money and reputation. 

So to encourage customers to pay early, you can try the most suitable marketing strategy which is offering good discounts. Discounts attract every customer and encourage them to pay early to save some extra bucks that otherwise have to be paid. 

Although every company might not be able to offer the discount option due to their cash flows however, you can try this at least with specific ones that are running successfully with a good amount of revenue.

  4). Set Payment Deadlines

Usually, companies send payment invoices to customers at the time of purchase of their product or service. The invoices include important payment terms that have to be followed by the customer. For instance, the term ‘Net 30’ is included; it suggests that the company is giving 30 business days to the customer to clear his/her credit payment. 

The terms of the invoice can be different for each company. They fix it upon the basis of the amount that has to be received and the credibility of the company and customer. So make sure the deadline is clearly mentioned on the invoice so that the customers can instantly have the idea by when they need to pay.

  5). Develop a strong relationship with Clients

This is one of the best ways to make your account receivable collection process successful. Try to develop strong bonds with your clients. Make them feel important. If you have ever received calls or messages for a credit card debt or due bill, you will understand how it feels. So even if your customer hasn’t paid the bill on time, talk to them with a calm mind and understand their problem. 

Your AP staff should develop a strong and healthy relationship with your clients by talking to them constantly. Always respect the client and give them value through your services. Make sure your business is connected with the client. 

This will also help to retain them as valuable customers. You will also know about their feelings regarding the product and services. Valuable feedback from a loyal customer will help you in the growth of your business.

You must have a back-up plan to receive your payments even in unforeseen circumstances. It is great if you have a strong relationship with the customers, but a back-up plan is important from the company’s perspective. Unforeseen circumstances that can prevent timely payments are bankruptcy, reduced cash inflow, decreased revenue, etc. So, if you face the non- payment issue in your business, follow the steps:

  • Call the customer and ask friends if they need more time to clear the payment. 
  • Wait for 5 business days, if it’s still not done. Call again. 
  • Visit the customer and send them a reminder through e-mail. Also, explain your situation and the need for timely payments under the mail. 
  • Send a letter asking for the payment. 
  • Send another and final letter for demand.
  • If the amount is still due, transfer the case to a debt recovering agency with reliable Accounts Receivable Services.

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