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5 Tools to Improve Your Accounts Receivable

By: The Ledgerist

The Short End
There are many aspects that go with running a successful business. Selling, hiring employees and management, and make sure your business runs smoothly.
But there is one aspect that is often overlooked by many business owners: collecting accounts receivables (A/R). Many companies have failed because of their poor cash-flow management. In short, a sale is a gift until the cash is in the bank.
Unfortunately, small businesses often come out on the short end of the  stick when it comes to accounts receivable collections — especially when doing business with large corporations. Many big-box retailers, for example, are stretching out their payment terms to vendors and suppliers
— sometimes for up to 90 and even 120 days. This is squeezing many small business’ cash flow cycles tighter and tighter.
As the owner of a small business, you might sometimes feel helpless when it comes to getting your customers to pay their bills on time. But this is absolutely the wrong attitude to take. Instead, be proactive by making accounts receivable collections a top priority.
Consider using these 5 tools to improve your accounts receivable cycle
1. Offer different payment options
Banks offer a wide range of cash management services that can help you improve collections and better manage your cash flow cycle. Automated Clearing House (ACH) eliminates the excuse of "the check is in the mail." Accounting software like QuickBooks allows to email invoices with a Pay Now link, letting customers pay you instantly online or from their mobile device accepting all mayor credit cards and ACH.

2. Be proactive in your invoicing and collections efforts. 

There are usually things you can do when submitting invoices to help make it easier for your clients to pay them. For example, make sure your invoices are clear and complete, with no missing information that might cause your client’s accounting department to kick it out of the system for further review.


Learn the subtle nuances of each client’s invoice payment procedures and follow them carefully. A few days before payment is due,contact your client’s accounting department to make sure they have everything needed to make payment — especially if the invoice is a big one.
3. Move fast on past-due receivables. 
Studies have shown that the longer receivables go uncollected, the less likely they are to ever be collected, either partially or in full. So day 45 is not the time to contact a client about a payment that was due on day 30.
4.  Send constant friendly reminders
Send courtesy reminders if you offer payment terms longer than 30 days. Contact customers by phone the day after payments are late, rather than waiting a week or more. Do not use letters or email, which are easier to ignore.
5. Consider offering an early payment discount. 
With a 2/10, net/30 discount, for example, customers will receive a 2 percent discount if they pay within 10 days, instead of 30. While there is a cost to your business in offering such a discount, the cash flow boost it provides could make it worthwhile.
To discuss accounts receivable strategies and  cash management tools like these in more detail, click below, or visit ledgerist.com
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