According to Business News Daily, “Accounts receivable are the lifeblood of a business’s cash flow.” These assets, sometimes known simply as AR, help companies calculate their profitability and get a clearer picture of their earnings. As with any key business system, streamlining the AR process makes good business sense.
Many businesses send out so many invoices that it can be difficult to keep track of them all. Without a company’s clear understanding of its invoice situation, it’s little wonder that nearly one in five U.S. invoices are unpaid at any given time. A streamlined AR process helps you keep track of your invoices, giving you a clear picture of the invoices you’ve sent, which ones have been seen by your clients, which ones have been paid, and how many are still outstanding.
Most of these invoice functions are available as part of comprehensive accounting solutions. Just remember to notify your clients before implementing the software, highlighting relevant changes such as the way they’ll receive or pay their bills.
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A Streamlined AR Process Helps You Get Paid Sooner
A common mistake many businesses make is failing to set clear payment terms and ensuring these are met. An invoice should never be paid simply when a client gets around to it.
Your invoice should clearly state a due date or an acceptable payment time frame after the receipt of the invoice. You may also need to revise your invoice to make it clearer for your clients to understand. If clients are unsure of how to make payments, when payments are due, or how much is owed, they’ll have to ask questions, which could delay the payment. In some cases, this confusion may cause them to neglect to pay their invoices altogether.
Sending a clear invoice encouraging timely payment is only one half of your streamlined accounts receivable process. The other is ensuring your payment terms are met. Whether you prefer to use automated software or another method, you should note when invoices are overdue and chase down these payments, following a clear schedule of phone calls, mail, and emails. Studies show that the longer an invoice is left unpaid, the less likely it is to ever get paid.
A Streamlined AR Process Helps Reduce Company Risk
There’s always some element of risk in running a business, but a good business manager knows the importance of minimizing risk wherever possible. A streamlined AR process is one area that can help companies reduce their risk.
A streamlined AR process allows your company to decide how and when you’ll be paid. An accounting company which offers payment processing as part of a comprehensive accounting solution, such as Sage debit and credit card processing, will allow your clients to pay with a range of popular credit and debit cards. While this system still gives clients a degree of choice, the options offered provide funds to your business more reliably than check or wire transfer because transactions are approved or declined instantly.
A Streamlined AR Process Helps Reduce Time Spent on Finances
Streamlining the AR process makes the accounts receivable system work more efficiently. Efficient work practices like these make good business sense because they increase productivity and reduce the amount of time you and your employees spend dealing with accounts receivable, or they can eliminate this process from your day-to-day business duties altogether.
For example, you might decide to bring in a bookkeeper or accountant, either full-time or on a contract basis, who has experience in streamlining accounts receivable processes. You might also employ an accounts receivable clerk or a collection service if you feel the process of following up on outstanding invoices is taking up too much of your time. Some accounts receivable software uses algorithms developed by accounting professionals to crunch your numbers so you can focus on other elements of your business.
For all these reasons, streamlining your AR process simply makes good business sense.
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