Accounts Receivable Management
Whenever a business grows, irrespective of which industry it belongs to, payments and expenses get complicated at one point. With the total number of accounts, invoices, lines of credit, etc. increased in magnitude as well as the number, it can be difficult to keep bad debt under control. This is where accounts receivable management comes in.
An accounts receivable management solution covers all the areas of accounts receivable to ensure that invoices are sent on time, the company’s financial situation is monitored in real-time, high-risk accounts are identified easily, and more.
Why Accounts Receivable Management is so Important?
Having a proper and rather an enterprise-level accounts receivable management solution is a must for every competitive business today. This is because it helps:
- Prevent late payments
- Minimise the instances of disputes with the customers and facilitate the resolution of those that do occur
- Manage the credit provided to the customers as well as allow for easy and quick disbursal of funds
- Lower bad debt on the balance sheet and higher receivables collection
- Reduce the Days Sales Outstanding (DSO) ratio
- Simplify the otherwise complicated and labor-intensive processes
What are the Advantages of Accounts Receivable Management?
The following are some of the main advantages of accounts receivable management solution:
Improved Cash Flow for Your Business
You need a healthy cash flow to have complete business control. This is because there are all kinds of recurring expenses that you need to manage. Then there are unexpected expenses such as maintenance costs, fulfilling of sudden large orders, investments, etc. that can only be fulfilled when the cash flow is good.
An accounts receivable management program can provide you a bird-eye view of your business. Thus, you can predict cash flow-related problems in advance and prepare or act accordingly.
Improved Business Productivity
Productivity can only be achieved when the business owners have an organised system for working capital management, cash flow monitoring, communication with the customers, etc.
An accounts receivable management can provide you all the tools you need to push your company’s productivity and lower the bad debt. For instance, with a dedicated client dashboard, you can check the pending invoices with every individual customer, their repayment history, credit terms, etc. So, even if a dispute arises in the future, you can easily cross-check the claims and achieve resolution in a small time, thus preventing disruption of the other business operations and the cash flow itself.
Informed Credit Service
How do you determine the credit limit for different customers? If you are relying on a “one size fits all” strategy, then it could be one of the things that are contributing to your unpaid invoice list and hurting the cash flow. However, you can fix this problem with an accounts receivable management that provides detailed analytics and repayment history.
It can help you identify your top customers for which you can offer a line of credit with relaxed credit policies. Similarly, it can mark the customers that are often late with invoice clearances, for which you can set stringent credit terms.
Lower Overhead Costs and Operational Expenses
An accounts receivable management solution can also help you control your overhead costs by saving time that’s otherwise wasted a lot in reconciliation, dispute management, invoice tracking and reminder generation, debt collections, etc. Plus, you can avoid hiring additional manpower altogether when a number of processes can be managed by an automated service alone.
What are the Features of a Good Accounts Receivable Management Solution?
A comprehensive accounts receivable management solution must have the following features:
Accounts Receivable Monitoring and Reporting
One of the most basic features expected from an accounts receivable management solution is accounts receivable monitoring and reporting. This allows you to make informed decisions about your business and also identify issues that are hurting the cash flow or your firm’s credit rating itself.
An accounts receivable management solution should offer full support for invoice management, right from invoice delivery to receivables collection. It should also help in automating the entire process as much as possible.
You can’t expect to get timely clearance of an unpaid invoice when there is no comprehensive support to make payments. In other words, a premium accounts receivable management solution will offer multiple payment methods and a simple interface for a customer to find a method which allows for an easy transfer of funds.
What good is accounts receivable management when a good chunk of precious company time is wasted in the verification of customer claims and detection of financial leakages? If an accounts receivable management solution offers a well-structured dispute management module, then there are few interferences in the normal operations, and the cash flow also improves gradually.