Last Updated on April 14, 2021 by Grey Idol
Behind every thriving company is an efficient accounts receivable game plan. It’s easy to get lost in the pile when it comes to tracking invoices and remembering how much money your customers owe you after providing them with a product or service.
If you don’t keep a close eye on this aspect of your business finances, you may lose money, and your business could suffer the consequences.
How Effective AR Management Can Help Your Business
Although you may not see instant results, your business can grow immensely with an optimized accounts receivable approach. Your AR is just one element of your company, but it impacts all the other elements as well. Poor AR management can result in many different problems, which can hinder productivity, reduce monetary benefit, and waste valuable time.
Below are several benefits successful AR management can offer your business:
- Improved Cash Flow
When you’re focused on keeping your AR in check, you’ll quickly notice an improvement in your overall cash flow. Collecting funds in a timely manner will ultimately foster your success, allowing you to expand, adapt, and continue to innovate. You’ll be able to invest your money into advanced technology, paying off debt, compensating your employees, and acquiring many other assets.
- Enhanced Efficiency
If your AR is managed well, this is bound to trickle down into other areas of your business. With an esteemed AR management solution, you can start streamlining and automating your processes while continuing to reach your internal objectives. The quicker and more straightforward the method, the more efficient your company will be.
- Better Quality
With an AR management system in place, you can be confident knowing you can use your funds to improve your products and services. This will only lead to better quality and more satisfied customers, which in turn, can result in boosted sales and an excellent reputation (which is truly a gift that keeps on giving).
- Save Money
No one wants to waste money, especially these days. But when you fail to follow up on that invoice that was a week late, or if you forget to track an important bill amount or many other common AR mistakes, you risk losing funds. AR management can help you avoid these damaging errors and save money that can be put back into your business.
- Upgrade Operations
Having a solid AR management strategy can affect your marketing technique, drive up sales, level up your customer service, and do wonders for the operations aspect of your business. The steadier your cash flow and the more organized and streamlined your AR process, the better your business will operate.
Tips to Optimize Your Accounts Receivable Methods
There are plenty of things you can do to start improving your approach to AR and see improvements in your company. Here are just a few simple ways to successfully optimize your AR strategy and start seeing positive outcomes:
- Agree on the Customer Payment Plan Early
Being proactive about your AR approach is an essential step in optimizing it. Sit down with your client and discuss the payment process as soon as possible. This way, you’ll have a plan in place immediately, giving you a step ahead on your AR (and probably eliminating future headaches).
- Follow Up Quickly on Past-Due Invoices
The longer you go without following up, the longer it will take for you to receive what you’re owed. That’s money that should be in your bank but isn’t, and you should pursue it with all diligence. Following up on past-due invoices quickly (as soon as the first day past the due date) will significantly improve your chances of collecting your payment.
- Manage Customer Data
It’s essential to have the correct customer data and make changes as they occur, as you want the right people to receive them. All changes should be tracked and switched out in your spreadsheet or whatever tool you’re using to store information. Some examples of these changes are new credit card numbers, change of address, new leadership taking over, different email addresses or phone numbers, etc.
- Institute a Standardized Billing Procedure
Many problems can arise during the billing process, which can lead to frustrated customers and employees. How you send bills and invoices needs to be 100% correct in all areas, detailed, consistent, and produced quickly. Remember that your company needs to clearly see the product or service being paid and how much the payment will be, just as much as your customers.
- Opt for Electronic Payment, Billing, and Invoicing
Nowadays, people don’t want a bunch of paper bills filling up their mailbox. Paying, billing, and invoicing electronically is a much easier method for both the customer and your company. The more clients who pay with credit cards, the fewer physical bills, invoices, and checks will be involved.
- Consistently Monitor your AR
How are you supposed to determine your AR system’s problem if you don’t frequently examine it? It’s important to recognize issues and then take a look at your current methods to see what can be improved upon. Don’t let your company’s AR slip under your radar, as the sooner you find the problem, the sooner you can find the solution.
What to Look For in an AR Management Solution
Many company issues stem from a lack of quality AR management. However, there is hope for those who have suffered the aftereffects of lousy AR organization and implementation. You don’t have to continue on the same old ineffective path. Make a step toward positive change today and find the right AR management solution for you.
Below are a few things you should consider before going all-in on AR management software.
In today’s world, you can have the entire world wide web at your fingertips. Now, you can also access any information from anywhere, thanks to the cloud. Make sure to opt for an AR tool that includes cloud-based technology, so you can quickly obtain the data you need, even on the go.
Data is extremely valuable, as it offers insights into what’s working for your business and what’s not. It’s important to seek AR management software that gives you comprehensive analytics so you can track your progress over time and make improvements as needed.
Managing accounts receivable is a time-consuming task requiring attention to detail and a stressful amount of tracking. Why continue doing this tedious, administrative work when you don’t have to? The best AR management tools offer automation for tasks like creating and sending invoices and following up on overdue payments.
Customer Payment Portal
Depending on the size of your business, you may also want to consider a payment portal for your clients. This will give them a safe and secure place to pay and offers you the chance to keep all your payment data in a single location for maximum efficiency and ease of access.
Artificial Intelligence (AI)
By now, you’ve probably heard a lot about artificial intelligence and how awesome it is. Over time, software with AI will learn how you do things and your preferences, saving you more time and giving you more control over your company finances. This advanced technology can also help reduce common human errors, ensuring the highest level of accuracy.
Avoid Costly Mistakes with an Effective AR Management Program
As a business owner, it’s unwise to ignore your AR process. It’s an integral aspect of your company that requires your attention. However, it doesn’t have to be challenging to manage. With some hard work, determination, and a solid management solution, you can start seeing remarkable results that will benefit you, your company, and your valued customers.
Grey is the Director of Marketing for altLINE by The Southern Bank. With 10 years’ experience in digital marketing, content creation and small business operations, he helps businesses find the information they need to make informed decisions about invoice factoring and A/R financing.