accounts receivable management services
Financial

A Complete Guide on What Small Businesses Need to Know About Accounts Receivable

Debts and Businesses

The business cycle runs on acquiring customers, providing them with your services, building goodwill, and subsequently retaining them for future endeavors. While doing so, there are many negotiations and compromises you end up doing. It is especially true for small businesses where the lifeline of the company runs on its client and goodwill built-up. Sometimes in that whim, small companies end up giving a lot of services in credit, which at the end of the payment period turns into accounts receivable. As all customers are not equally reliable, recovering such debts by mere calling up or a follow-up letter is highly unlikely. Thus comes the need for hiring specialist accounts receivable management services who have professional expertise over handling such reports and make subsequent recoveries staying within the legal compliances as well.

What Are Receivable Accounts?

Now before going into various strategies to handle your receivable accounts or learning about tips to hire AR account, receivable services begin with understanding what receivable accounts are. Popularly known as AR, accounts receivable are the money that your business owes from all customers against some goods or services that have been offered to them. Hence, while you are drafting your balance sheet AR amount always comes under the assets column. The total amount of AR should be equal to the total outstanding amount in the invoices generated to the customers, which are not yet paid. Since the amount of AR accounts comes under the current assets column, they are highly valued possession in any company’s report. For small businesses, they practically act as the lifeblood for keeping the business afloat.

Why Keeping Track of AR Is Essential?

Keeping track of all receivable accounts is one of the primary objectives of any business. This is first because unless you have a detailed track record of all bills, there are high chances that you may forget about specific amounts and end up providing your product free. Again, keeping track of all purchases and orders is vital for prompt billing and dispatching of the invoices. The further you delay in sending bill the slimmer the chances of you getting on-time payment becomes.

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Thus to manage accounts receivable, it is vital to maintain a consistent daily routine. For all those businesses dealing with retails, it’s best to opt for immediate payment post each transaction system. While for other companies where customers may ask for credit lines, an invoice must be generated immediately with the shipment of the product along with mentioning the payable product details.

How to Deal with Account Receivable Situations?

When you have started a business to maintain goodwill and hold the market, giving off credit-based products and services is unavoidable. However, here are a few tips to combat or avoid AR situations.

1. Don’t Indulge In Business with Anyone

No matter how desperate you are to hold a grip over the market, don’t indulge in activity with anyone and everyone. Take help from leading AR management agencies on insights about which companies are good at paying off and which are bad. Run a credit check on potential customer businesses to know how much of a functional layer they are. You can also write a letter to your customers for their vendors and customer testimonials and get information on whether those vendors get paid on time or not.

2. Pen down the Payment Terms

Sometimes misunderstanding between business and the customer leads to payment delay and AR situations. To avoid it write down every detail of your business policy, especially the payment patterns before you start doing business. Write in detail about your invoicing process, stipulated time the customer has for paying, and also mention the consequences of delayed payment like fines or interests or other legal aspects.

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3. Be as Much Convenient as Possible

Studies have shown a 50% rise in the accounts recovery rate only when businesses have suitable means of payment. In case your finance team cannot handle or manage various modes of cash, you may rely on professional account receivable services. These services can very well manage multiple platforms for payment like visa, credit or debit cards, PayPal, direct debit or deposit services, and various other authentic online modes of payment.

4. Try for Personal Guarantees

Just like many banks opt for personal guarantees or bonds for giving the loan, you can also ask your clients to sign-up personal warranties before doing business with them. This is a great asset as it gives you an excellent opportunity to suing them or that business for unpaid debts.

To Wrap

To conclude, it needs to be mentioned that recovering accounts receivable isn’t an easy task. And make sure that you don’t end up case biasing against your customers. If you wish to ensure a seamless account recovery, it’s best to opt for leading debt collection agencies. With their market experience, professional expertise, and domain knowledge, they can cater back to your money within a matter of a few days.

mathewalena

Alena Mathew is a Health and beauty addict and By profession, she is Digital Marketing Expert. Her passion for reading has given her a platform to expand her thinking from which she has penned down articles on many topics in several areas of different industrie.

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