What Can You Do To Keep Your Cash Flow And Accounts Receivable In Check?

It is a well-known fact that Accounts Receivable is the backbone of any business, and every accounts receivable process aims to increase cash flow.  

Doesn’t this seem interlinked?  

Yes, of course. it’s interlinked.   

But increasing your cash flow without affecting your accounts receivable process is nearly impossible.   

LoL, I’m just kidding. There are several ways to manage your accounts receivable and cash flow. Here are the top five most effective ways to manage your accounts receivable process and increase your cash flow. 

 

5 Effective Ways To Keep Your Business’s Accounts Receivable And Cash Flow On Check 

Problems occur and it’s natural. But, the way we overcome those problems decides our future (and our business's future also). Here are the five most effective ways to manage your accounts receivable and maximize your cash flow.  

 

1. Evaluating Credit Your Terms 

A healthy cash flow depends on managing accounts receivables effectively, which includes evaluating your credit terms.

Now you may doubt, what Credit Term is and how it helps manage accounts receivable and maximize cash flow. 

Credit terms are the conditions under which a seller extends credit to a customer, such as the payment period and any early payment discounts.  

Businesses should evaluate their credit terms regularly to manage accounts receivable and increase cash flow. This includes determining if the present terms are effective and, if required, implementing revisions.  

The average collection period can be used to evaluate credit terms. This indicator indicates how long a company takes to receive money from its customers. If the average collection period is too long, it may suggest that the credit terms are too liberal, and the company's credit standards should be tightened.  

Another strategy is to evaluate customers' creditworthiness before offering credit. This includes performing credit checks and establishing credit limits to reduce the risk of non-payment. To promote quick payment, businesses might also give incentives for early payment or motivate customers to make payments on time.  

In short, reviewing credit terms is an essential step in managing accounts receivable and enhancing cash flow. Businesses can optimize their credit policies to minimize risk and strengthen their financial position by regularly monitoring credit terms and making changes as needed. 

 

2. Monitoring Your Accounts Receivable 

Monitoring your accounts receivable process means keeping track of the money owed to you by your customers for the goods or services you've provided. One way to increase your cash flow is to monitor your accounts receivable regularly.  

Is monitoring accounts receivable killing most of my time? Will it take a lot of effort?  

You may have these questions in your mind before start monitoring your accounts receivable. Not only you, but 80% of business owners will also have the same questions.   

As you'll see in the following section, it's no big deal and not that challenging.  

To keep track of your accounts receivable, look at your aging report, which reveals how long your customers have owed you payments. If you observe that some customers are frequently late with their payments, you may need to follow up with them to ensure that they pay on time.  

Setting up a payment plan or offering rewards to customers who pay on time is another strategy to manage your accounts receivable. You also can think about giving discounts to customers who pay in whole or on time.  

You can boost your cash flow and ensure that your business has the money it needs to run effectively by monitoring your accounts receivable and taking actions to optimize payment processes. 

 

3. Sending Invoices Promptly 

Managing your accounts receivable means keeping track of the money owed to you by your customers and making sure you get paid on time. One simple way to improve your cash flow is by sending your invoices promptly.  

How would you feel if your customer forgot to pay for the service or good you offered them on the base of credit, or if they never received the invoice?  

Well, it then needs to be taken care of immediately.   

When you provide a customer with products or services, you should give them an invoice as quickly as possible. This shows them how much they owe you and when they must pay. By delivering the invoice as fast as you can, you increase the probability that your customer will pay you on time or even early.  

If you postpone sending the invoice, your customer may forget about it or think it is not urgent. This might cause delays in obtaining your money, affecting your financial flow and capacity to pay your expenses on schedule.  

As a result, submitting invoices on time is a simple yet efficient approach to managing your accounts receivable and boosting your cash flow. 

 

4. Use a Collection Agency 

Managing accounts receivable refers to the process of tracking and collecting payments that are owed to your business from customers. When payments are not received on time, it can impact your cash flow and create financial difficulties for your business. 

If none of the above works for your business, you must think that your business is doomed. And in fact, this will be true if you still refuse to take any action immediately.  

Using a collection agency is one approach to improving your cash flow and managing your accounts receivable. A collection agency is a service that collects past-due debts on behalf of businesses. 

When you deal with a collection agency, they will handle all interactions with customers who have not paid your invoices. This can save you time and resources that you might otherwise spend hunting down payments. 

Collection agencies use a variety of techniques to get customers to settle their debts. This can involve sending letters or phone calls to the customer, as well as pursuing legal action against the customer in some situations. 

Using a collection agency can be an effective way to improve your cash flow by helping you in recovering payments owed to your company. However, it is crucial to pick a reputable agency that adheres to ethical practices and does not harass or abuse customers. 

 

5. Automate Your Accounts Receivable Process 

This section is a kind of hack that is now being upgraded and transformed by most businesses. Keep reading to find out about the hack. 

Managing your accounts receivable is keeping track of the money owed to you by other people or businesses and ensuring that you are paid on time. When you offer products or services to a customer, they usually do not pay you immediately away. Instead, they will receive an invoice or bill detailing how much they owe and when they must pay it.  

To correctly manage your accounts receivable, you must keep track of all invoices and bills and ensure that you follow up with your customers who are late on their payments.  

Is managing your accounts receivable a tedious and time-consuming process, especially when you have a lot of customers?  

The answer is no and is only possible with Accounts Receivable Automation. 

This is where automating your accounts receivable process can help. You can streamline your invoicing and payment collection process and simplify keeping track of everything by implementing technology and software solutions.  

These examples will show you what automation can do for you:  

• Invoices and payment reminders can be sent automatically: Instead of manually creating and sending invoices and payment reminders, you can configure the application to do so. This may save you a lot of time while ensuring that your customers have the information, they require to pay you on time.  

• Accept online payments: While many companies still accept checks or cash for payment, these methods can be time-consuming and unpleasant. You can speed up the payment process and make it easier for your customers to pay you by taking online payments.  

• Monitor payments and delinquent accounts: With automated accounts receivable software, you can keep track of all your payments and quickly identify customers whose accounts are past due. This will allow you to follow up with them more efficiently and reduce the chance of non-payment.  

Overall, automating your accounts receivable process can assist you in better controlling your cash flow and save time and effort on invoicing and payment collection. You can focus on developing your business and supporting your customers while still getting paid on time if you use automation to streamline these accounts receivable processes. 

 

Final Thoughts about Managing your Accounts Receivable and Maximizing your Cash Flow: 

Hope you now had a clear idea about managing your accounts receivable process while increasing your cash flow. As the article states you can use automated accounts receivable software or you can go for a collection agency.   

But as a piece of personal advice, transforming your accounts receivable into an automated process will be a perfect fit for your business as there will be zero impact on your customer relationship, and is also cost-efficient.    

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