7 Strategies for Effectively Managing Accounts Receivables
January 27, 2023
Accounts receivables, also known as AR, are amounts that a company is owed by its customers. Accounting firms must manage these accounts effectively in order to maximize profitability and minimize risk. This can be a daunting task, as it involves tracking customer payments, ensuring timely payments, and collecting any overdue payments. To make this process easier, there are a few strategies that accounting firms can use to effectively manage accounts receivables.
1. Develop Clear Policies
It's essential to have clear policies in place for how accounts receivables will be managed. This should include details such as when payments are due, how late payments will be handled, and what types of payment methods are accepted. Having clear policies in place will help ensure that everyone involved knows what to expect and can help avoid any potential misunderstandings.
2. Stay Organized
Having an organized system for tracking and managing accounts receivables is essential for success. Make sure to keep track of all invoices and payments in a system that is easy to access and understand. This involves using accounting practice management software to keep track of customer payments, invoices, and other related documents. You also need to stay on top of any changes or updates to customer accounts, such as changes in payment methods or billing addresses.
3. Follow Up Quickly
If a customer is late on a payment, it's important to follow up regularly. This can include sending out reminder emails or making phone calls. You must be firm but polite when dealing with late payments, as this can help ensure that customers understand the importance of meeting their payment obligations.
4. Offer Flexible Payment Options
Offering flexible payment options can help make it easier for customers to pay their invoices on time. This can include offering payment plans, accepting credit cards, or allowing customers to pay in installments. By making payment options more accessible, it can encourage customers to pay their invoices on time.
5. Use Automation
Automation can be a great tool for managing accounts receivables. Many accounting practice software have automated reminders that can be sent out to customers when payments are due or overdue. Additionally, automated payment systems can make it easier for customers to make payments and ensure that payments are received in a timely manner.
6. Monitor Credit Risk
If you want to reduce your accounts receivable risk, you should monitor credit risk. Credit risk is the risk of a customer not paying their bill. To reduce the risk, you should review customer credit records, establish credit limits, and monitor customer payment behavior. Additionally, you should consider offering incentives for customers who pay their bills on time.
7. Offer Incentives
Finally, offering incentives for timely payments is another great way to manage accounts receivables. By offering discounts or other incentives, accounting firms can encourage customers to pay their invoices on time. This can help to ensure that payments are received on time and can help to minimize the risk of non-payment.
Accounting firms need to be aware of the importance of effective management of their accounts receivables. These strategies will help to ensure that the firm’s cash flow remains healthy and that clients are paying their invoices on time. When these strategies are put into place and managed effectively, accounting firms can ensure that they are maximizing their revenue and minimizing the risks of overdue invoices.
Your accounts receivables will be the least of your worries as long as you have the right tools at your disposal. Firm360 is exactly the kind of tool that accounting firms need to stay on top of their accounts receivables. It provides a comprehensive suite of features to help firms streamline the process of invoicing, track payments, and manage their accounts receivables more efficiently. Book a demo today to see how an accounting practice management software like Firm360 can help you streamline your firm's processes.