An efficient and streamlined accounts receivable process has a positive impact on marketing, sales, customer service, and overall operations.
FREMONT, CA: A successful business requires an effective account receivable (AR) management strategy. Despite this, many business owners must systematically approach the situation, resulting in a disastrous outcome.
Improving and optimizing accounts receivable processes is beneficial to reap many benefits. An efficient and streamlined AR process impacts customer service, marketing, and sales. The process of optimizing accounts receivable might seem intimidating at first. However, it is possible to speed up and significantly improve the situation by taking a systematic approach. Business activities such as the following can significantly improve the efficiency of your accounts receivable process, leading to other benefits for your company.
Accurate customer data: Establishing and maintaining an effective accounts receivable process requires centralizing the primary data process to ensure customer accuracy. Invoices can be mailed to the wrong address, which results in late payments. A consistent audit of customer accounts should be performed to check for anomalies such as unusual or inappropriate payment terms, credit limits, and discounts. It is important to document changes made to customer data, and controls should be in place to prevent unauthorized persons from accessing or editing it.
Credit approval process: Boosting sales often leads to detrimental credit habits among businesses. It is helpful to extend credit, but this should be done per a set of procedures. Clear instructions should be provided regarding credit limit evaluation and override, account hold placement, and how to apply. As circumstances change, the credit approval process should be reviewed regularly.
Effective billing process: Effective billing and invoicing of customers require accuracy and efficiency. It is quite possible for pricing, units of measurement, and similar errors to cause havoc. It is important to create and send invoices on time, and the process of creating them should be consistent and defined. Automating billing and invoicing as much as possible is one way to improve them. Problematic accounts can be pinpointed using exception reports. Give customers autonomy by setting up a portal to shift some of the work to them.
Cash application process: To receive payments correctly, they must be applied upon arrival. Applying them to the right customer and the correct invoices is important. It will be difficult to pinpoint the original problem if disputes or issues arise later. It is also important to apply for payments quickly so you always know what accounts are due at any time. It might be worthwhile to offer a limited number of payment options to simplify the process. Keep journals up-to-date and post them before deadlines. Cash should only be deposited in suspense accounts once it is clear where it belongs.
