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Do You Know These Tips About Account Payable and Receivable Process

There is a renowned saying in business that"cash is king," but it's effective accounts receivable policies and procedures that will help your team have faster access to the cash it needs to accelerate growth and achieve company objectives.

Hiccups in accounts receivable (A/R) sets can have extreme consequences for a business because it puts stress on the amount of working capital necessary to finance operations. Because of this, we had to look at every way possible to boost A/R collections so we could have sufficient money to pay the bills.

A/R direction is an area where many companies struggle. Consider that: Companies are"loaning" their clients money on half of all invoices when they are not paid in time.

In working together with our member firms around the globe, we have seen the negative consequences of not having appropriate systems in place for A/R collections. But with a little fine-tuning and execution of some best practices, you can enhance A/R ranges and reinvest the cash to grow your business.

1. Create an accounts receivable dashboard.
Every entrepreneur and business leader needs to clearly understand his or her company's finances, particularly as it pertains to cash and A/R. That is because at some point later on, you are bound to become a rough patch when customers spend overdue (or worse, don't cover at all) and you need to make tough decisions about devoting your precious cash.

An A/R dashboard provides you simple access to monitor and measure the cash coming to the corporation. The dashboard should include generally approved key performance indicators (KPIs) for example A/R turnover ratio, days sales outstanding, average days delinquent and A/R aging by customer. Think of your dash as an early-warning system so you can resolve any challenges that could be on the horizon.

2. Teach your staff.
After the KPIs are decided, educate your team on the importance of each metric. Let them understand how their activities affect each KPI and the overall fiscal health of the company. When your team sees how their job contributes to the company's development, success and endurance, they'll work harder to achieve -- and ideally exceed -- company objectives.

Additionally, it is important to have a set schedule of weekly, monthly, quarterly and yearly meetings to review the dashboard and keep your staff satisfied with A/R performance goals. That way everybody can be ready and make the most of the time together.

3. Produce written policies and processes.

These policies, which should be part of a larger accounting policies and procedures manual, specify the method by which the company invoices clients, collects records and payments transactions to the accounting system.

Successful companies have an A/R staff that's dedicated to adhering to these policies and procedures and to ensuring that the company gets paid on time. Their A/R teams get involved early when an account is past due, sending friendly reminders and phoning customers when payments aren't made in a timely way. They bring about members of the sales or project management teams to find ways to work with customers to ensure payment. Simply speaking, these companies make A/R sets a top company priority so that it's embraced as a member of their company culture.

4. Keep accurate client account info.
This may seem like a no-brainer, but believe me, I've heard a lot of stories from business leaders that complain about getting paid late because billing information in the accounting program was incorrect. Accurate customer data is vital to having a successful A/R collections process. Incorrect addresses and names on bills can irritate clients and result in late payment. Billing information ought to be reviewed regularly and appropriate controls should be in place to prevent unauthorized changes to client data.

Let us face it: Running A/R isn't the most fascinating part of running a company. But by implementing these four strategies, you are going to maximize the efficiency of your A/R team and better position your company for future growth.

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