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Accounts receivable makes up for a very considerable part of the capital. Especially for small businesses struggling with resources, accounts receivable can hold a significant value.
Accounts receivable is an asset for a company promising a certain value to the business in the coming future.
Optimization of accounts receivable paves the way for:
Back-office accounting outsourcing firms might sound like a better solution for all the business enterprises struggling to optimize their accounts receivable and suffering from bad debts.
Let’s look at some simple tips that can help small businesses revise the accounts receivable collection process.
Consistency in accounts receivable collection process
A functional flow in the events maintaining consistency is always the key towards a well-performing environment. Maintaining a standard procedure for debt collection is crucial for all businesses. Politely communicating with the debtors, ensuring delivery of timely alerts for payment, dealing with invoices sequentially are some essential steps towards a better AR collection process. Requiring paperwork and metrics like Accounts receivable turnover ratio and Accounts receivable Aging reports is a must.
Generating AR ageing reports
The first step towards initiating accounts is clearing all doubts regarding pending payments and clarifying all potential areas that require work. Verifying and tracking the process enables ascertaining the magnitude of the work that needs to be done ahead of time. Accounts Receivable ageing reports ensure that all the important documents and related information are in order.
The Accounts Receivable turnover ratio is the estimated average of the number of times a business collects its AR.
Payment planning and discount
The accounts receivable ageing report and metrics power the collection process. Offering discounts to the clients in order to promote prompt and early payment is a favourable step. But customization of the industry type and numerous payment plans is essential. Keeping the debtors happy is a tip that can benefit the business in the longer run.
Review of Accounts Receivable process
Having a detailed review and a careful look at the internal affairs of the accounts receivable process is the climax part.
The final essential steps include:
Following the above steps will cater for an improved accounts receivable process: FinConcile is a team of accredited CA’s, lawyers, CFA’s, and others who cater to better accounting and finance management. We are a UK-based outsourcer bringing Functionality to your business finance and overall structure.