Accounts Receivable (AR) is the money that customers owe to another party in exchange or products/services that were delivered but haven’t been paid for yet. It’s important to manage this process and here’s why. In a perfect world, buyers would always make their payments at the time when the products were sold. Then the sellers wouldn’t have to worry about cash flow issues. However, the business world doesn’t always work this way. In real work, sellers must deal with tough competition. In many cases, they must offer their products on credit in order to get more customers. Some customers default on payments, which require sellers to look for possible losses on sales. A 2012 study showed AR management’s driver is presser to lower Days Sales Outstanding (DSO). There are other factors including payment term extension, overall cost reduction, better service levels, and risk of default. If companies what their business to keep succeeding then it’s critical for sellers to take some basic steps in order to use Accounts Receivable Management that’s effective. Here are some methods: Methods for Effective AR Management \t Offer Discounts for Fast Payments Here’s an effective way a seller can encourage customers to square up on their credit. For example, clients might be given a full month to make payments. However, if they decide to make the payment within 10 days they’ll receive a 10% discount. Meanwhile, if they make the payment within 20 days they get a 5% discount. Many buyers are willing to pay more quickly if they’ll get a discount on their purchase. \t Offer Electronic Payment Options There are various ones available today so it’s highly advisable for your company to offer them. It starts with using email to send the email. Make sure you get a confirmation from the buyer that they’ve received the bill. You can also register with the bank’s online payment options. Today’s shoppers are often too busy to visit the physical store of a seller or simply don’t have the drive to do it. On the other hand, buyers feel more comfortable making payments from their home or office. The process can be done in minutes instead of days so this makes it a more practical option. Today’s customers want to make purchases and payments using the most convenient methods. This is why it’s critical to offer your customer's more digital options. This will help to make sure your company is paid sooner rather than later. \t Get Credit Report for Big Deals This is important when a seller is making a deal with a customer for a big sale. When companies examine the past payment records of a customer this tells the company if they should or shouldn’t offer flexible credit terms. In the case the costs are higher a credit appraisal is still worth the extra expense. It can help the company to prevent costs, losses, and stress. \t Focus on the Signatories When possible it’s a good idea to get just a few signatories on an invoice when it’s needed. That will help to speed up the process of the invoice getting processed. The more signatures that are required the longer it will take to process. It might seem like a minor issue but it’s one worth noting. That’s because the more signature that is required the longer it will take to process the invoice. That can have a negative effect on your company’s operations. \t Get the Sales Team Involved The sales team should do as much of the preparing/handling of the invoice as possible. A separate accounts department shouldn’t be handling it. The sales team knows who they sold products to and the cost of the transaction. If you have too many people/department involved it can cause problems handling the invoice documents. Possible results include inefficiency and confusion, which are both results you’ll want to avoid. \t Send Invoices Quick Enough It’s important for your company to avoid the mistake of sending late invoices. This also helps to make your buyers less lazy about making payments. Your customers might think the company isn’t worried about receiving payments. If that’s the case then they won’t feel rushed about sending payments. Sellers should make it very clear that they’re serious about receiving payments and thus send invoices as fast as possible to customers. It’s also important to set a very clear deadline for paying the bill. \t Get the Bill Disposed It’s important for your company to maintain its cash flow to stay in business. It’s a bad idea to wait for customers to pay in the future. It’s a good idea to go to a financial institution or bank and use its factoring facilities. This will allow the bill to get disposed and help to keep your cash flow going. \t Get all Invoice Documents in Order This is another important step to take. It’s important to make sure all of the documents related to the invoice are in order. It’s easier to prepare/send the invoice if the sales team doesn’t have to spend time looking for different pieces of paper. Meanwhile, if the customers have questions about the invoice they can solve issues faster when documents are filed well. Make sure to do the scanning/digitization/extraction/indexing of data on a regular basis. This will prevent the payment from being delayed for various reasons. \t Work with Collections Services This could be directly or with a customer service company that provides this service. It’s unfortunate but even when sellers take all the steps they can there are still buyers who won’t pay on time for whatever reason. In fact, it’s also possible for the customers to default. Companies don’t have the time and effort to keep chasing after customers who won’t pay because they can’t or won’t. That’s why a BPO company offering professional collection service can help to make possible for customers to pay more efficiently and completely. This is critical to get better results. It’s worth noting that this will affect your company’s profit margins but is certainly worthwhile since getting late payments is better than no payments.