<p>Everything needs proper management to achieve promising results! Likewise your <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software" target="_blank">accounts receivable</a></strong>! &nbsp;</p>

<p>Hiring a person to follow up with your customers or third-party collection teams will not help you to recover the unpaid dues effectively! You need to efficiently manage the accounts receivable right from the beginning, for a lot of reasons.</p>

<p>But first, &nbsp;</p>

<p>&nbsp;&nbsp;</p>

<h2><strong>What is Accounts Receivable Management? &nbsp;</strong></h2>

<p>The Accounts Receivable Management strategy relies on the payment of invoices by customers. With a good accounts receivable management strategy in place, one can prevent overdue payments or non-payments which could disrupt the cash flow growth. This is an efficient solution to strengthen the financial health of the business. &nbsp;</p>

<p><strong>Accounts Receivable Management is like keeping track of your IOUs. </strong>&nbsp;</p>

<p>If you lent a buddy $100 and he promised to repay you in a week. The $100 is now considered an &quot;account receivable&quot; by you. &nbsp;</p>

<p>So what if a week passes and your friend still hasn&#39;t paid you back? You may send them a text message or call to remind them of their promise. This is known as &quot;communication.&quot;&nbsp; &nbsp;</p>

<p>Similarly, businesses have a lot of customers that owe them money for goods or services. The company must maintain track of all its receivables and ensure that they are paid on time. &nbsp;</p>

<p>To do this, the company employs an accounts receivable management system, which includes generating invoices, notifying customers of payment due dates, and following up on late payments. It&#39;s all about &quot;communication&quot; and making sure everyone is on the same page, much like telling your friend to pay you back. &nbsp;</p>

<p>Accounts receivable management assists organizations in avoiding cash flow issues and ensuring that they get paid for their job. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>5 Reasons Why You Should Have Efficient Accounts Receivable Management System: &nbsp;</strong></h2>

<p>&nbsp;</p>

<h3><strong>1) Enhances Your Cash Position&nbsp;&nbsp; &nbsp;</strong></h3>

<p>Accounts receivable management is the process of collecting payments from customers efficiently and consistently. Improving the business&#39;s financial situation is one way to increase the efficiency of accounts receivable management. &nbsp;</p>

<p>A solid cash flow gives a company more flexibility and resources to handle its accounts receivable successfully. These are some of the reasons why improving financial position is critical for compelling accounts receivable management: &nbsp;</p>

<ol>
	<li>
	<p><strong>Payment to Suppliers on Time:</strong> A solid financial position allows a company to pay its suppliers on time. This might assist the company in maintaining strong connections with its suppliers and ensuring a consistent supply of goods and services. &nbsp;</p>
	</li>
	<li>
	<p><strong>Reduced Need for Borrowing:</strong> When a company has a healthy cash flow, it is less reliant on borrowing to cover its expenses. This lowers the tax expenditure and other costs involved with borrowing, which can increase the business&#39;s profitability. &nbsp;</p>
	</li>
	<li>
	<p><strong>Ability to Provide Discounts:</strong> By improving its financial position, a company can provide discounts to customers who pay their invoices on time. This can encourage customers to make payments on time, reducing the average collection period and improving cash flow. &nbsp;</p>
	</li>
	<li>
	<p><strong>Improved Credit Management:</strong> A company&#39;s credit risk can be better managed if it has a solid cash position. It may provide loans to customers with a lower chance of defaults and more carefully monitor its customers&#39; creditworthiness. &nbsp;</p>
	</li>
	<li>
	<p><strong>Better Planning and Forecasting:</strong> A solid cash flow enables a company to better plan and anticipate its profitability. This helps businesses to better manage their accounts receivable, plan for potential deficits, and make smart financial decisions. &nbsp;</p>
	</li>
</ol>

<p>In conclusion, improving a company&#39;s financial position can offer the resources and flexibility needed to handle accounts receivable efficiently. It can assist in increasing cash flow, lower borrowing costs, and improving the company&#39;s financial health. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>2) Provides Control Over Cash And Working Capital&nbsp;</strong>&nbsp; &nbsp;</h3>

<p>An effective accounts receivable management system manages the process of collecting payments from customers that owe money to a business. One key component of this process is the management of cash and working capital, which is required to guarantee that an organization has the resources to satisfy its financial responsibilities while continuing to operate efficiently. &nbsp;</p>

<p>Controlling cash and working capital is critical for various reasons. For starters, it lets a business efficiently control its cash flow, which is crucial to preserving financial stability. A corporation may guarantee that it has enough money on hand to satisfy its short-term financial demands, such as paying payments and completing orders, by exercising control over its cash. &nbsp;</p>

<p>Second, having control over working capital allows an organization to properly manage its accounts receivable. This includes keeping track of outstanding invoices, following up with unpaid customers, and taking necessary action to collect overdue payments. Controlling working capital enables an organization to guarantee that it has the resources it needs to pursue delinquent invoices and collect payments on time. &nbsp;</p>

<p>Lastly, having control over cash and working capital is critical for risk management. A corporation may recognize possible risks and take actions to reduce them if it has a thorough grasp of its financial status. If a corporation, for example, has a significant number of outstanding invoices, it may face cash flow issues if those invoices are not paid on time. A corporation may handle these risks and maintain financial stability by having control over its working capital. &nbsp;</p>

<p>And at last, having control over cash and working capital is crucial for an effective<strong> <a href="https://www.maxyfi.com/lp/accounts-receivable-management-software" target="_blank">accounts receivable management system</a></strong>. An organization should guarantee that it has the resources it needs to function efficiently and collect payments from its customers on time by successfully managing cash flow, monitoring outstanding invoices, and eliminating risks. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>3) Increase The Accounts Receivable Collection Efficiency&nbsp;&nbsp; &nbsp;</strong></h3>

<p>The effectiveness of accounts receivable collection relates to how soon a corporation can collect payments owed from its customers. A high degree of efficiency in this area is crucial to a company&#39;s success since it immediately affects cash flow and financial health. &nbsp;</p>

<p>&nbsp;It is critical to improving the efficiency of the collection process to have an effective accounts receivable management system. This entails putting strategies and best practices in place to collect money as promptly and effectively as feasible. &nbsp;</p>

<p><strong>Pay stream Advisors reports that companies using automated accounts receivable management systems can: &nbsp;</strong></p>

<ul>
	<li>
	<p><strong>Reduce call preparation and prioritization time from 15% to 6%. &nbsp;</strong></p>
	</li>
	<li>
	<p><strong>Reduce dispute management time from 40% to 13%. &nbsp;</strong></p>
	</li>
	<li>
	<p><strong>Help spend more time soliciting payments from customers from 20% to 62%.&nbsp; &nbsp;</strong></p>
	</li>
</ul>

<p>One reason for this is that the longer it takes to collect cash from customers, the greater the chance of nonpayment. This can result in cash flow issues, as well as a drop in profitability and general financial health. Businesses can lower the risk of nonpayment and guarantee they have the cash flow they need to operate and expand by improving the efficiency of the collection process. &nbsp;</p>

<p>Another reason why enhancing accounts receivable collection efficiency is crucial is that it helps to build customer relationships. When a company can collect payments promptly and efficiently, it sends a message to customers that it is competent, organized, and dependable. This can aid in the development of trust and loyalty, both of which are necessary for long-term success. &nbsp;</p>

<p>In general, improving the effectiveness of accounts receivable collection is an essential component of a well-managed and successful organization. Businesses can decrease the risk of nonpayment, enhance cash flow, and establish great customer relationships by employing best practices and methods to streamline the collection process. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>4) Improves Customer Communication&nbsp;&nbsp; &nbsp;</strong></h3>

<p>For various reasons, improving customer communication is critical for an effective accounts receivable management system: &nbsp;</p>

<ol>
	<li>
	<p><strong>Timely payment:</strong> Communicating with customers about their outstanding debts clearly and effectively helps encourage them to make timely payments, lowering the overall accounts receivable amount and enhancing cash flow. &nbsp;</p>
	</li>
	<li>
	<p><strong>Dispute settlement:</strong> Effective communication can aid in the resolution of issues with invoicing or payment problems. It can assist in identifying and addressing issues quickly, reducing payment delays, and guaranteeing a better invoicing process. &nbsp;</p>
	</li>
	<li>
	<p><strong>Good Customer Interaction:</strong> Better interaction with customers can build deeper connections, boosting the probability of repeat business and recommendations. It can also assist organizations in better understanding their customers&#39; payment preferences and issues, allowing them to modify their accounts receivable operations accordingly. &nbsp;</p>
	</li>
	<li>
	<p><strong>Compliance:</strong> Good communication can assist guarantee that legal and regulatory debts for accounts receivable management are met. Businesses, for example, must follow specific protocols when seeking to collect past-due debts, and effective communication can assist avoid infractions and the accompanying fines. &nbsp;</p>
	</li>
</ol>

<p>Improving customer communication is critical for developing an effective accounts receivable management system. Businesses can lower the risk of late accounts and enhance their cash flow by creating openness, establishing partnerships, and encouraging early payments. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>5) Enables Better Customer Service &amp; Satisfaction&nbsp; &nbsp;</strong></h3>

<p>Most of the time it&#39;s your fault that the customers pay late. Curious to know where you make an error? &nbsp;</p>

<p>There could be a possibility that you didn&#39;t send the invoice early enough for them to pay on time. In addition, it could also be that the invoice was damaged and they won&#39;t pay until it&#39;s fixed. These issues can have a significant impact on customer satisfaction. &nbsp;</p>

<p>However, the pathetic thing is that these issues are preventable ones. But due to manual errors, these issues arise. They are caused by missing or incorrect purchase order information on your invoices. &nbsp;</p>

<p>Also, consider how frustrated your customers will be if you keep calling them for late payments when it&#39;s not their fault they didn&#39;t receive the invoice on time, or if you don&#39;t include proper details in the invoices.&nbsp;&nbsp;</p>

<p>By automating invoice delivery, detecting problems with invoices, such as missing purchase orders, and providing everything you need in one centralized location, an Accounts Receivable Management system enables you to serve your customers better, save more time, and improve your relationship so they&#39;ll buy more from you in the future. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>Final Thoughts about Enhancing your Accounts Receivable Management System: &nbsp;</strong></h2>

<p>By now you would&#39;ve understood the importance of Accounts Receivable Management. What if you could make it simpler with automation? &nbsp;</p>

<p>Yes! &nbsp;</p>

<p><strong>&quot;One Automation; One Click; Accounts Receivable Management Made Simple By Maxyfi!&quot;. &nbsp;</strong></p>

<p>In simple words, implementing Accounts Receivable Software can maximize your accounts receivable collection efficiency as well as help manage your accounts receivable much more simpler.&nbsp;&nbsp;</p>

<p>Help your Accounts Receivable Management system to save time and resources!&nbsp; &nbsp;</p>

<p>For more tips on how to tackle the challenges in your accounts receivable process, follow our&nbsp;<strong><a href="https://www.maxyfi.com/blog" target="_blank">Maxyfi blogs</a></strong>.&nbsp;</p>


By using automation, it is now easy to manage accounts receivable daily. This blog clearly explains about the Automation in A/R Management.

Accounts Receivable Management – Made Simple

Everything needs proper management to achieve promising results! Likewise your accounts receivable! With automation, it's now easier to manage all your accounts receivable!

Accounts Receivable Management – Made Simple With Automation!

<p><strong>Accounts receivable turnover ratio or Debtor&#39;s turnover ratio</strong> is a key performance indicator to measure your business&#39; efficiency in providing credit and how effectively payments are collected on time. We shall delve deeper into this topic, including how to calculate the turnover ratio and use it for our business/organization.</p>

<ul>
	<li>
	<p><strong>What does Turnover mean in Accounts Receivable?</strong></p>
	</li>
	<li>
	<p><strong>What is Accounts Receivable Turnover Ratio?</strong></p>
	</li>
	<li>
	<p><strong>How to calculate Turnover Ratio with example?</strong></p>
	</li>
	<li>
	<p><strong>How to determine a good turnover ratio?</strong></p>
	</li>
	<li>
	<p><strong>Why is&nbsp;Turnover Ratio important?</strong></p>
	</li>
</ul>

<h2>&nbsp;</h2>

<h2><strong>What does Turnover mean in Accounts Receivable?</strong></h2>

<p>Turnover refers to the total amount of money collected from their sales or how fast they sell their products/goods. For example, when a business sells its inventory in six months and requires new inventory or the total amount of money collected by a business over a certain period for their goods/products.</p>

<p>In <strong><a href="https://www.maxyfi.com">Accounts Receivable</a></strong><a href="https://www.maxyfi.com"><strong>&nbsp;Automation</strong></a>, turnover is the length of time taken to receive the collections offered on credit to customers by a business/organization. It is an important measure as it helps a business understand how quickly they collect their receivables.</p>

<h2>&nbsp;</h2>

<h2><strong>What Is Accounts Receivable Turnover Ratio?</strong></h2>

<p>Accounts Receivable Turnover Ratio is the ratio of average accounts receivable collected during a certain period divided by the net credit sales of the same period.</p>

<p>It is a measure of how efficiently a business collects its due invoices as well as indicates the financial and operational performance of a business. This allows businesses to keep a check on their cash flow growth as well as working capital costs.</p>

<h3>&nbsp;</h3>

<h3><strong>How To Calculate Accounts Receivable Turnover Ratio With Example?</strong></h3>

<p>&nbsp;</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Accounts Receivable Turnover Ratio = Net Credit Sales */* Average Accounts Receivable</strong></div>

<p>&nbsp;</p>

<p><strong>Net Credit Sales</strong> refer to the total revenue generated by a business on selling products/goods to customers on credit, minus all sales returns and sales allowances.</p>

<p><strong>Net Credit Sales = Sales on credit &ndash; Sales Returns &ndash; Sales Allowances</strong></p>

<p>To calculate <strong>Average Accounts Receivable</strong>, divide the sum of the beginning accounts receivable and the ending accounts receivable by the sum of 2.</p>

<p><strong>Average Accounts Receivable = (Beginning Accounts Receivable) + (Ending Accounts Receivable) */* 2</strong></p>

<p>Let&#39;s look at an example to understand better.</p>

<p>Company ABC has beginning accounts receivable of $180,000, ending accounts receivable of $200,000, and net credit sales of $4,750,000.</p>

<h3><strong>To calculate the turnover ratio :</strong></h3>

<p>Average Accounts Receivable : $180,000 + $200,000 = $380,000 / 2 = $190,000</p>

<p>Accounts Receivable Turnover Ratio : $4,750,000 / $190,000 = 25</p>

<p>Therefore, Company ABC has an accounts receivable turnover ratio of 25.</p>

<h3>&nbsp;</h3>

<h3><strong>How To Determine A Good Turnover Ratio?</strong></h3>

<p>It doesn&#39;t take much to determine a good turnover ratio as it depends on each company&#39;s credit policies and the number of days taken for them to collect their receivables.</p>

<h3><strong>Good Accounts Receivable Turnover Ratio</strong></h3>

<p>A good turnover ratio in Accounts Receivable indicates an efficient collection system, strong credit policies, and/or could be due to a good number of high-quality clients.</p>

<h3>&nbsp;</h3>

<h3><strong>Why Is Turnover Ratio Important For Your Business?</strong></h3>

<ol>
	<li>
	<p>The Accounts receivable turnover ratio can help businesses understand the efficiency of their collections and analyze strategies that work for their business to improve revenue.</p>
	</li>
	<li>
	<p>This will also enable them to strategize and plan for future business investments while staying on top of their cash flow.</p>
	</li>
</ol>

<p>And more tips on how you can improve your business&#39;s turnover ratio, stay tuned to <strong><a href="https://www.maxyfi.com/blog" target="_blank">our blog</a></strong>!</p>

<p>&nbsp;</p>

<p>&nbsp;</p>


Read this guide to accounts receivable turnover ratio and understand your business's collection efficiency and how it can help plan future finances.

Maxyfi | Accounts Receivable Turnover Ratio 

Read this in-depth guide to accounts receivable turnover ratio and understand more about your business's efficiency in collections and how it can help strategize future finances.

Accounts Receivable Turnover Ratio

<p><strong>Meet Mike.</strong></p>

<p>Mike was running a successful business with good cash flows and it was going all well until many of his customers defaulted payments in large numbers something he wasn&#39;t prepared for. Mike had to borrow funds to meet operational expenses which&nbsp;increased the cost of doing business thus putting his business at risk.</p>

<p>What could have caused the <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software">accounts receivable</a></strong> challenges for Mike?&nbsp;Let&#39;s do a case study.</p>

<p>&nbsp;</p>

<h2><strong>Weak Enforcement</strong></h2>

<p><em>&quot;Mike wasn&#39;t enforcing his customers to pay within the payments terms and was ok with delayed payment&quot;.</em></p>

<p>Most businesses offer&nbsp;services on a credit basis where an invoice is raised on a specific milestone and customers pay these invoices on agreed timelines. Businesses and customers will typically have mutually agreed to timelines to make the payment also called <strong>Net D</strong>.</p>

<p>For example, Net 30 indicates that the net invoice amount is expected to be paid in full within 30 days of the Invoice Issue date. Net 10, Net 15, Net 30, and Net 60 are some of the common payment terms in practice.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Review and agree on comfortable payment terms that meet customers&#39; payment cycle. Enforcing payment terms that don&#39;t meet customers&#39; business models will result in delays. Identify customer payment challenges and design strategies to enforce adherence to the payment terms.</strong></div>

<p>&nbsp;</p>

<h2><strong>Lack of Monitoring</strong></h2>

<p><em>&quot;Mike wasn&#39;t monitoring cash flows and related statistics, He wasn&#39;t noticing that his month-on-month Days&nbsp;Sales Outstanding (DSO)&nbsp;kept increasing.&quot;</em></p>

<p>Many businesses miss the insights from the account receivable data that provides early warning signals. Some of these insights can provide views on business-level cash flows while others can also be derived at the individual customer level.</p>

<p><strong>Below are some of the metrics that need to be monitored, and measured to ensure corrective actions can be taken upfront</strong>.</p>

<ul>
	<li><a href="https://www.maxyfi.com/blog/days-sales-outstanding" target="_blank"><strong>Days Sales Outstanding(DSO)</strong></a></li>
</ul>

<p>DSO is about how quickly money is collected after an invoice is issued. A healthy DSO does not exceed your terms by half for example if the payment term is Net 30, then a healthy DSO is 45 Days</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate DSO :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">(average accounts receivable &divide; billed sales) x number of days</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Best Possible DSO</strong></li>
</ul>

<p>Best Possible DSO considers only current accounts receivable and not past data. It indicates what your on-time payment turnaround is going to be.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate the Best Possible DSO :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">(current accounts receivable &divide; billed sales) x number of days</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Average Days Delinquent</strong></li>
</ul>

<p>Average Days Delinquent (ADD) is a metric that lets companies know the average number of days those late payments take to get collected. The lower your ADD score, the better.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate Average Days Delinquent :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">DSO &ndash; Best Possible DSO</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Turnover Ratio</strong></li>
</ul>

<p>Your accounts receivables turnover ratio or Debtor turnover ratio shows how well you manage the credit you extend to your clients and how efficient you are at collecting payments. The higher the ratio the better.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate Turnover Ratio :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">Total sales for the period &divide; ((receivables at the beginning of the period + receivables at the end of the period) &divide; 2)</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Collection Effectiveness Index(CEI)</strong></li>
</ul>

<p>CEI helps to understand how strong your accounts receivable management is. The closer the CEI is to 100%, the better your processes.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate Collection Effectiveness Index :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">(beginning receivables + monthly credit sales &ndash; ending total receivables) &divide; (beginning receivables + monthly credit sales &ndash; ending current receivables) x 100</div>

<p>&nbsp;</p>

<h2><strong>Ineffective Communication strategy</strong></h2>

<p><em>&quot;Mike was following up with the point of contact from customers on an ad-hoc basis and more of informal reminder, he was using offline follow-up techniques like emails&quot;</em></p>

<p>Following an ineffective communication strategy and doing informal communication will give the customers the view that the receiving organization is fine&nbsp;with delays.&nbsp;Moreover,&nbsp;most of the time the follow-up happens with the same person and doesn&#39;t follow the escalation route when the same doesn&#39;t give the expected outcome.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Adapt&nbsp;a suitable dunning process where communications progress from gentle reminders to effective&nbsp;letters and phone calls, emphasizing the need to make payments on time.</strong></div>

<p>&nbsp;</p>

<h2><strong>Poor and Decentralized AR Management</strong></h2>

<p><em>&quot;Mike had a team of 3 people working on the&nbsp;<a href="https://www.maxyfi.com/lp/accounts-receivable-software"><strong>accounts receivable process</strong></a>&nbsp;and each of them was capturing AR information locally. There was&nbsp;no single place to audit the conversation, commitments, and next planned actions. The same became a&nbsp;people-centric process.&quot;</em></p>

<p>Businesses lose control of account receivables if they are not able to track them centrally or&nbsp;audit the communications happening with the customers. Typically businesses&nbsp;follow up via several mediums like emails, letters, calls, and SMS. The follow-up information is split across several devices and calls are not recorded/transcribed thus making it difficult to audit or use&nbsp;as evidence for any legal proceedings.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Adopting a centralized accounts receivable&nbsp;system is key for any business to get a view of the overall status of account receivables plus monitor follow-up status. Centrally recording the follow-up helps audit as well as removes people&#39;s dependency and enables the user to understand the background of conversations to help lead better the next conversation.</strong></div>

<p>&nbsp;</p>

<h2><strong>Irregular Promise Tracking</strong></h2>

<p><em>&quot;Mike was not driving the customers to provide a Promise date for making payments and not tracking closely whether the customer had made the payments as per the promise&quot;</em></p>

<p>One of the common mistakes that a business makes&nbsp;is that they don&#39;t drive the conversation with customers to provide a promised date by which the payments will be made. More damage happens when there is no follow-up or tracking to check whether the customer kept the promise by making the payment.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Equip a &quot;Promise To Pay&quot; feature&nbsp;in the dunning&nbsp;process and the same has to be recorded formally via email/letter&nbsp;to customers. Send reminders before the promised date and perform a more rigorous strategy in case the customer&nbsp;doesn&#39;t&nbsp;keep the promise.</strong></div>

<p>&nbsp;</p>

<h2><strong>Lack of Payment Options and Incentives</strong></h2>

<p><em>&quot;Mike had provided bank deposits as the only means of payment and that became challenging, especially during lockdowns. He didn&#39;t offer any incentives or discounts as well for on-time payments&quot;</em></p>

<p>Customers have their own preferred payment channels, and enforcing limited payment options will have a negative impact on their payments. Also, customers typically tend to pay towards the end of payment terms as they can hold liquidity till that time and there is no benefit to making early payments.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Offer multiple payment options and you are more likely to get paid faster. Offering incentives also encourage customers to pay early like offering 2/10 Net 30 which states that a discount of 2% is applicable if paid within 10 days for 30 days payment term.</strong></div>

<p>&nbsp;</p>

<h2><strong>Time-consuming&nbsp;Interactions</strong></h2>

<p><em>&quot;Mike&#39;s customers have several Invoices/bills to be paid, and the same is shared via emails and letters. Customers typically respond to queries or requests via email most of the time and that can be quite time-consuming&quot;</em></p>

<p>Interactions in the accounts receivable process typically occur through emails and letters which are discrete by nature. Customers need to refer to multiple email threads or physical letters to get details of their overdue. This can be tedious as well and the same goes for&nbsp;responding to these emails as well.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Provide&nbsp;customers with one consolidated view of overall outstanding dues with various embedded options such as digital payment options, messaging options, promise request features, etc. Digital interactions via the Customer&nbsp;Portal can bring transparency as well as a seamless one-stop for all overdue queries and actions.</strong></div>

<p>&nbsp;</p>

<h2><strong>Accounts Receivable Disputes Negligence</strong></h2>

<p><em>&quot;Some of Mike&#39;s customers had raised disputes on incorrect Invoices and also on the quality of services rendered&nbsp;and he wasn&#39;t able to handle them properly.&quot;</em></p>

<p>Customers typically will hold the payments till the disputes are resolved or corrected. Disputes can also worsen the relationship with the customers, bringing in friction and making it much more difficult to collect payments leading to bad debts or credit risks.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Track disputes effectively and reviews the process to address billing/payment&nbsp;or service concerns thereby paving the way for better customer experience and faster payments.</strong></div>

<p>&nbsp;</p>

<h2><strong>Lack of Credit Scoring</strong></h2>

<p><em>&quot;Mike was providing services to customers irrespective of the repeated payment delays, with increased AR delinquency levels.&quot;</em></p>

<p>Customers belonging&nbsp;to various industry sectors have different levels of risks involved, for example,&nbsp;the Logistics and Hospitality sector impact due to the pandemic, etc. Lack of credit scoring at the customer level will increase exposure to bad debt and put businesses at a bigger risk.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>An effective accounts receivable&nbsp;software should score the customers based on&nbsp;the sector,&nbsp;behavioral, environmental, and other relevant factors. A customer with a bad credit score or risk profile needs a review of the payment cum credit terms.</strong></div>

<p>&nbsp;</p>

<h2><strong>Accounting Challenges</strong></h2>

<p><em>&quot;Mike was not updating the payments received in the banking books against the accounts receivable&nbsp;process on a regular basis.&quot;</em></p>

<p>The lack of a real-time payment interface and reconciliation with the accounts receivable&nbsp;process will cause an incorrect dunning process, resulting in an unpleasant experience for customers.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Offer a digital payment and&nbsp;reconciliation process that updates the due amount in real-time at the customer cum invoice level. This reduces manual reconciliation errors and helps the accounts receivable automation&nbsp;process.</strong></div>

<p>&nbsp;</p>

<p>Tackling all these challenges can get overwhelming and tedious for anyone, that&#39;s why it&#39;s best to invest in&nbsp;<strong><a href="https://www.maxyfi.com/lp/accounts-receivable-automation-software" target="_blank">accounts receivable automation</a></strong> software&nbsp;for your business.</p>

<p>Start automating your accounts receivable process right away with our <strong>Accounts Receivable Automation Software - Maxyfi</strong>, and watch your business thrive!</p>

<p>For more tips on how to tackle the challenges in your accounts receivable process, follow our <strong><a href="https://www.maxyfi.com/blog" target="_blank">Maxyfi blogs</a>.</strong></p>

<p>&nbsp;</p>

<p>&nbsp;</p>


Tackling accounts receivable challenges in your business can get tedious and nerve-racking for anyone. Here are the solutions to avoid them in the future. 

Accounts Receivable Challenges Of Every Business

Tackling accounts receivable challenges in your business can get tedious and nerve-wrecking for anyone. Here's a case study on Mike's challenges with accounts receivable and solutions to avoid them in the future. 

Accounts Receivable Challenges Of Every Business!

<p>You know, how it isn&#39;t easy to get your dunning emails across to customers and get them to pay faster. It takes a lot of effort and patience to follow up with your customers regularly. But with these seven ways, you can improve your emails without pressuring your customers while following up with them to pay the receivables. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>Here&#39;s How to Improve Your Dunning Emails For A Efficient Accounts Receivable Process</strong> &nbsp;</h2>

<p>&nbsp;</p>

<h3><strong>1. Personalization&nbsp; &nbsp;</strong></h3>

<p>A little bit of personalization can go a long way!&nbsp; &nbsp;&nbsp;</p>

<p>Adding the customer&#39;s name and maybe a few questions related to their previous interactions or from customer data can show a noticeable difference in the click-through rate compared to regular, boring emails. It can set apart your dunning emails and make your emails seem more trustworthy and reliable. &nbsp;</p>

<p>Dunning emails are sent to customers to remind them of unpaid invoices or late payments. Personalizing these emails can dramatically boost your recovery rate and enhance your <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software" target="_blank">accounts receivable</a></strong> process. Here are a few ideas for personalizing your dunning emails: &nbsp;</p>

<ul>
	<li><strong>Address the customer by name:</strong> Using the customer&#39;s name makes the email feel more personalized and less like a generic form letter. In the greeting and throughout the email, use the customer&#39;s name. &nbsp;&nbsp;</li>
	<li><strong>Relate to the individual invoice or payment that is past due:</strong> Instead of issuing a broad reminder, refer to the specific invoice or payment that is past due. This demonstrates to the customer that you are paying attention to their account and emphasizes the significance of the payment. &nbsp;</li>
	<li><strong>Explain why the payment is necessary:</strong> Provide a concise explanation to the customer as to why the payment is necessary. You may describe how it affects your ability to deliver services or your cash flow. &nbsp;</li>
	<li><strong>Provide help:</strong> If the customer is experiencing trouble making the payment, assist. This might take the shape of a payment plan, a discount for early payment, or a date extension. &nbsp;</li>
	<li><strong>Adopt a nice tone:</strong> Dunning emails may come out as harsh or intimidating, which reduces the likelihood of customers responding. Instead, use a polite tone and underline your desire to collaborate with the customer to solve the issue. &nbsp;</li>
</ul>

<p>Personalizing dunning emails can make customers feel more appreciated and ready to participate in the payment process. You may enhance your dunning email recovery rate and strengthen your customer connections by using these strategies. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>2. Give them the FOMO &nbsp;</strong></h3>

<p>Fear of loss or missing out can make your customers pay as quickly as possible in order not to lose the company&#39;s services/products. This method can be used while following up with your customers. Persuade them of the value of your services and the benefits that they would lose if they don&#39;t pay on time. &nbsp;</p>

<p><strong>You can try the following tactics to increase the dunning email recovery rate by creating fear in your customers: &nbsp;</strong></p>

<ul>
	<li><strong>Limited-time offer:</strong> Consider giving a limited-time discount or promotion to entice customers to pay their unexpected balance before the offer expires. This increases the chance of a response by creating a sense of urgency. &nbsp;</li>
	<li><strong>Benefits should be highlighted:</strong> Address the advantages of paying the outstanding debt, such as avoiding late penalties, maintaining a good credit score, or retaining access to a useful service or product.&nbsp;</li>
	<li><strong>Social proof:</strong> Indicate to customers that others have already taken advantage of the offer and reaped the benefits of settling their outstanding balance. You might provide testimonials or data on the offer&#39;s success. &nbsp;</li>
	<li><strong>Personalize the message:</strong> Make the message more relevant and engaging by using the customer&#39;s name and referencing particular data about their account. This might make the customer feel more obligated to answer. &nbsp;</li>
	<li><strong>Create a sense of community:</strong> Build a feeling of community by emphasizing the group of customers who have previously settled their outstanding debt and are reaping the advantages. This can foster a sense of belonging and encourage the consumer to act. &nbsp;</li>
	<li><strong>Use urgency in the subject line:</strong> Employ a title tag that conveys a feeling of urgency, such as &quot;Last opportunity to prevent late fines&quot; or &quot;Don&#39;t miss out on this limited-time offer.&quot; &nbsp;</li>
</ul>

<p>You can enhance the effectiveness of your dunning emails and persuade more customers to settle their outstanding debts by implementing these tricks or by implementing accounts receivable software with the above-mentioned features. Nonetheless, avoid overusing these strategies or creating a false feeling of urgency, since this might harm your connection with your customers. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>3. Being Concise &amp; Clear &nbsp;</strong></h3>

<p>Make sure the emails are short, crisp, and to the point. It should be able to convey all the details required with the brand&#39;s tone. Create a strong brand identity and a sense of trustworthiness in the emails while persuading your customers. It helps them believe that they can rely on you and feel confident to engage with you more. &nbsp;</p>

<p><strong>Being brief and clear when dunning emails can dramatically enhance the recovery rate. Here are some pointers to get you started: &nbsp;</strong></p>

<ul>
	<li><strong>Employ a succinct and clear subject line:</strong> The subject line should clearly explain the objective of the email and capture the recipient&#39;s attention. Use generic subject lines such as &quot;Payment Reminder&quot; or &quot;Invoice Due&quot; to avoid being noticed in a packed inbox. &nbsp;</li>
	<li><strong>Make the email short and to the point:</strong> A long and wordy email might be confusing and difficult to understand. Maintain a succinct and to-the-point message. Provide an overview of the problem and what steps the receiver should follow. &nbsp;</li>
	<li><strong>Employ bullet points and formatting:</strong> Bullet points and formatting can help to make an email simpler to read and understand. Include the outstanding balance, due date, and any other vital information in bullet points. &nbsp;</li>
	<li><strong>Provide specific instructions:</strong> Make it clear what action the receiver must take. Give payment instructions, including the amount due, due date, and payment options available. &nbsp;</li>
	<li><strong>Consider using jargon:</strong> Avoid using industry-specific jargon or acronyms that the receiver might not understand. To guarantee that the recipient receives the message, use clear and easy-to-understand language. &nbsp;</li>
	<li><strong>Provide an explicit call to action:</strong> Conclude with a strong call to action, such as &quot;Please make a payment before the due date to prevent any late penalties or collection procedures&quot;.&nbsp;&nbsp;</li>
</ul>

<p>You can raise the chance of a favorable response, boost the recovery, and enhance your<strong> <a href="https://www.maxyfi.com/lp/accounts-receivable-software" target="_blank">accounts receivable process</a></strong> rate by being concise and clear in your dunning emails. &nbsp;</p>

<p>&nbsp;</p>

<h3>4. Dispatch Multiple Emails &nbsp;</h3>

<p>You cannot expect to receive your collectibles by sending just one email (unless you are lucky). Hence, you need to send multiple emails at regular intervals, say one or two weeks, while building up the urgency and creating a sense of loss aversion with each follow-up email. &nbsp;</p>

<p>For businesses, dunning emails are a crucial part of the accounts receivable process, and sending several emails may be a successful approach for increasing recovery rates. Here are some pointers for sending out repeated dunning emails: &nbsp;</p>

<ul>
	<li><strong>Send numerous dunning emails in a row:</strong> Sending many dunning emails in a row will help you stay top-of-mind with your customers and remind them of their overdue amount. You may arrange a series of emails to be sent at particular intervals (e.g., one email every three days), and each email can have a distinct tone and message. &nbsp;</li>
	<li><strong>Alter the message:</strong> Sending the same message in each dunning email can rapidly become redundant and may discourage your customers from taking action. Instead, to appeal to your customers, alter the message and employ different perspectives. For example, in the first email, emphasize the dangers of nonpayment, while in the second email, emphasize the benefits of timely payment. &nbsp;</li>
	<li><strong>Add a clear call to action:</strong> Include a clear call to action in each dunning email, such as &quot;Please settle your amount now&quot; or &quot;Click here to make a payment.&quot; Make it as simple as possible for your customers to take action, and be sure to give clear payment instructions. &nbsp;</li>
	<li><strong>Personalize the emails:</strong> Making your dunning emails more personal can help them be more successful. In the email, include your customer&#39;s name, alluding to their outstanding debt, and personalize the message depending on their payment history with your organization. &nbsp;</li>
	<li><strong>Be persistent but not aggressive:</strong> It&#39;s critical to be persistent but not forceful with your dunning emails. Avoid using unpleasant language or issuing threats, since this may turn off your customers and harm your connection with them. Instead, be tough but courteous, emphasizing the significance of settling their outstanding debt.</li>
</ul>

<p>By following these guidelines, you may send out repeated dunning emails that will improve your recovery rate and encourage your customers to settle their outstanding debt. You can also acquire these by implementing automated accounts receivable software in your collection process. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>5. Enabling Replies &nbsp;</strong></h3>

<p>It&#39;s best to enable replies to your emails if you can because when the customers have any doubts or queries, they can always easily reply to your email asking the same. Otherwise, they&#39;d leave it at that and forget it, or might have trouble reaching you through any other means, hence delaying the payments as well. &nbsp;</p>

<p>Dunning emails are a necessary element of a company&#39;s accounts receivable process. These emails are sent to customers who have outstanding payments and require that customers make the payment. Allowing answers to your dunning emails can assist enhance recovery rates by giving customers a direct avenue to interact with you and fix any difficulties they may be experiencing. Here are some suggestions for improving the dunning email recovery rate by enabling replies: &nbsp;</p>

<ul>
	<li><strong>Customize the email: </strong>Address the customer by name, and personalize the email&#39;s content as much as possible. This helps to establish a connection with the customer and increases the likelihood of their responding. &nbsp;</li>
	<li><strong>Make it simple to respond:</strong> Add a call-to-action button in the email that customers may use to respond directly to the email. This might be as basic as a &quot;Respond&quot; button or as elaborate as &quot;I have a query regarding my invoice.&quot; &nbsp;</li>
	<li><strong>Use a recognizable sender name:</strong> Employ a known sender name, such as your company name or the name of a certain department, to assist customers in identifying the email and feeling comfortable replying. &nbsp;</li>
	<li><strong>Reply as soon as possible:</strong> Respond rapidly to customer responses to show that you are dedicated to addressing their issues. &nbsp;</li>
	<li><strong>Provide specific instructions:</strong> Provide detailed information on how to make a payment or handle any concerns with a missed payment. This can assist customers in understanding what they need to do to address the problem. &nbsp;</li>
</ul>

<p>You can enable answers to your dunning emails and boost the recovery rate of overdue payments by applying these guidelines to your accounts receivable process to boost your collection and enhance your cash flow. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>6. Using A Different Sender Address </strong>&nbsp;</h3>

<p>People often ignore promotional emails and most of the emails can end up in spam. Therefore, it helps to switch up the sender addresses once in a while to yield better results. Personalizing them by sending emails from an important person like a CEO or CFO or Manager can create a sense of reliability and credence. &nbsp;</p>

<p><strong>Although using a new sender address can be a useful method for increasing the rate of dunning email recovery. Here are some measures to follow to put this plan into action: &nbsp;</strong></p>

<ul>
	<li><strong>Change your email address:</strong> Make a new email account that is distinct from the one you use for work. This email address should be relevant to your company or brand and easy for your customers to remember. For instance, if your company&#39;s name is XYZ Corporation, you can use an email address like <a href="mailto:payments@xyzcorp.com" target="_blank">payments@xyzcorp.com</a>. &nbsp;</li>
	<li><strong>Specify why you&#39;ve changed your email address:</strong> Make careful to clarify why you&#39;re using a different email address in your dunning emails. This can help you create trust with your customers while also decreasing the likelihood of your emails being labeled as spam. &nbsp;</li>
	<li><strong>Customize your emails:</strong> In your dunning emails, use your customers&#39; names and tailor your content to their scenarios. This can assist to customize your emails and boost the probability that your customers will react. &nbsp;</li>
	<li><strong>Test and monitor outcomes:</strong> Once you&#39;ve put this plan in place, make sure to test and track the results. To see if this method worked, compare the recovery rate of your dunning emails before and after using a new sender address. &nbsp;</li>
	<li><strong>Follow up:</strong> After sending your dunning emails, don&#39;t forget to follow up with your customers. This can help increase the odds of them making a payment and decrease the likelihood of them being late in the future. &nbsp;</li>
</ul>

<p>Overall, using a new sender address might be a good way to increase the recovery rate of your dunning emails. You can improve the effectiveness of your dunning process and your total cash flow by customizing your emails, creating trust with your customers, and measuring your outcomes. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>7. Automation &nbsp;</strong></h3>

<p>Automating your emails can help speed up the process and let you focus on other important details. With pre-defined templates that you can customize to your needs, you can dispatch effective follow-up emails and build efficiency in payment recovery. &nbsp;</p>

<p>Implementing automated accounts receivable (AR) software may significantly enhance your dunning email recovery rate, which is the percentage of customers that react and pay after receiving payment reminder emails. Here are some methods you may do to boost the recovery rate of dunning emails utilizing AR software: &nbsp;</p>

<ul>
	<li><strong>Customize your emails:</strong> Tailor the payment reminder emails with the customer&#39;s name, invoice number, and unpaid balance using the AR software. This helps to catch their attention and increases the likelihood that they will read the email. &nbsp;</li>
	<li><strong>Schedule reminders:</strong> Arrange for automated payment reminders to be sent out at regular intervals using the AR software. This guarantees that customers receive timely reminders, improving the likelihood that they will pay on time. &nbsp;</li>
	<li><strong>Provide payment plans:</strong> Implement the Automated Accounts Receivable software to provide payment plans to customers who are having difficulty paying their outstanding invoices. Based on the customer&#39;s payment history and credit score, this can be done automatically. &nbsp;</li>
	<li><strong>Monitor email open and reaction rates:</strong> Using Accounts Receivable Software, monitor the open and response rates of payment reminder emails. This will let you evaluate the efficiency of the emails and make any required changes. &nbsp;</li>
	<li><strong>Adopt multiple channels:</strong> Utilize the Accounts Receivable Software to send payment reminders via email, text message, and phone calls. This makes sure customers receive payment reminders and enhances the likelihood of their responding. &nbsp;</li>
	<li><strong>Evaluate data:</strong> Use the Automated Accounts Receivable Software to examine the information gathered from the payment reminders, such as response rates and payment timings. This can assist you in identifying trends and making data-driven decisions to increase the rate of recovery. &nbsp;</li>
</ul>

<p>You can enhance the dunning email recovery rate and lower the number of outstanding payments by implementing automated <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software" target="_blank">Accounts Receivable Software</a></strong> and following these procedures. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>Final Thoughts about Improving your Dunning Email Recovery Rate via Automation &nbsp;</strong></h2>

<p>Maxyfi has a wide array of pre-defined templates that you can choose and customize from. To automate now with Maxyfi, get started here. &nbsp;</p>

<p>For more tips and updates to manage your accounts receivables automation better, follow our <strong><a href="https://www.maxyfi.com/blog" target="_blank">Maxyfi blog</a></strong>.&nbsp;</p>


It takes a lot of patience to follow up with your customers regularly. But with these 7 ways, you can now improve your emails to get your accounts receivable faster.

Book a Demo

Our Blogs

Most Popular

Accounts Receivable Management – Made Simple With Automation!

Accounts Receivable Turnover Ratio

Accounts Receivable Challenges Of Every Business!

7 Ways To Improve Your Dunning Email Recovery Rate Now!

Recent Post