Maintenance of accounts receivable is one of the most difficult processes for all business owners. It is imperative to properly maintain the accounts receivables because even a small error can lead to a huge loss. The accounts receivable process is directly linked with the cash flow. Thus, if you want to maintain a good cash position in your company, then you should pay attention to the account receivable of your business.
But, the accounts receivable maintenance process incorporates various challenges. Here, in this article, we are going to discuss various challenges in the accounts receivable process and various accounts receivable problems solutions to overcome them. The DSO is a factor that helps in determining the speed of collecting the accounts receivables.
The DSO helps to determine how slowly or quickly a business owner collects the account receivables. It is imperative to pay attention to the value of DSO. You should maintain the small value of DSO so that the cash position of the company can be improved. There are different ways to reduce DSO, and they are described below:
1. Send Invoices At Right Time
If you want to reduce the value of DSO significantly, then you should send the invoices to your customers at the right time. It is recommended that you should send them immediately after selling goods or services. You should properly check the billing addresses of customers before sending them invoices.
The manual process of sending invoices takes a lot of time. Therefore, you should invest in electronic receivable solutions. If you opt for manual processing, then it will take too much time for sending invoices, and consequently, it will lead to a late collection.
Always keep in mind that if longer it takes, then it will lead to a bad impact on the cash flow of your company. Therefore, it is important to make sure that you send the invoices at the right time so that there will be no delay in collecting payments. In addition to this, you should ensure that the billing policies are properly conveyed to your customers to avoid disputes later on.
2. Offer Incentives
You should announce an incentive for getting early payments from customers. Alluring incentives will help in receiving quick payments from the customers. Most business owners offer a discount on the total bill for paying early. It will definitely encourage your customers to pay as soon as possible.
3. Provide Various Payment Methods
You should not just stick to the cash payment option because it can also lead to a delay in the payment collection process. If you want to overcome this problem, then you should consider collecting payment through debit cards, credit cards, Smartphone payment applications. You can charge a certain amount for fixed products or services every month.
The accounts receivable solutions will significantly improve the cash flow in your business and reduce the hassle in the account receivable process. Offer a wide range of payment options to your customers can lead big improvement in the cash collection process.
4. Protect Your Business From Bad Clients
The bad clients can affect the cash flow in your business and also leads to big losses. The customers who always make excuses for delaying payment are not good clients for your business. Before extending your credit to new customers, you should check their credit history.
It will give you an idea about their behavior in making payments. You should protect your business from the customers who are not responsive. Time is precious for all business owners, and you should not waste it on these bad clients.
5. Increase Accounts Receivable Productivity
If you want to improve the productivity of account receivables, then you should closely keep an eye on the accounts receivable processes. Most business owners invest in the ERP system or the latest technology accounting software to efficiently manage the accounts receivables. Along with the latest technology software, it is imperative to hire competent staff members. If you are totally dependent on the manual process for the accounts receivables, then you should replace it with the latest technology software.
The manual process of updating sheets, managing the received cash, taking follow up for delayed payment, etc. is a time-consuming process. Moreover, in the manual process, there is a huge probability of errors. Therefore, choosing the latest technology accounts receivable portal for managing the accounts receivables is the best technique. The new technology software will automate the process and lead to fewer errors,
6. Regular Performance Analysis
You should regularly review your account receivables. It will help you to determine the faults in the process and required updates in it. Moreover, reviewing the accounts receivable process also helps in identifying the bad clients that are harmful to your business.
