Troubleshooting high operating costs in AR: A guide for your business

If your business is like most, you’re always looking for ways to reduce operating costs. After all, reducing expenses means more profits for you and your shareholders.

One of the most common areas where businesses see high costs is in their accounts receivable (AR) operations. Luckily, there are several ways to troubleshoot and fix these issues.

Below, we’ll outline some critical strategies for troubleshooting and reducing your AR operating costs.

Accounts receivable is an operational activity, which is a type of current asset on the balance sheet.

Why?

Accounts receivable is money owed to a company by its customers for goods or services that have been provided but not yet paid for. Operating activities are those necessary to run a business, such as manufacturing, selling, and delivering goods or services. Other operating activities include inventory management, customer service, and marketing.

Accounts receivable is also classified as an operating activity because it is directly related to the company’s core business operations. Without accounts receivable, your company would not be able to continue operating. Thus, accounts receivable is essential to your company’s business model, so it must be managed carefully.

Accounts receivable, the money your customers owe you for goods or services you’ve provided, can be a challenge for businesses of all sizes. Though it may seem straightforward – you give a good or service, and your customer pays you for it – in reality, many complexities can arise.

For example, what if a customer doesn’t pay on time? Or what if they dispute the charges?

These challenges can quickly add up, and if not managed properly, they can seriously impact your business’s bottom line.

One of the biggest challenges of accounts receivable is managing late payments. This can put a strain on your cash flow and make it challenging to meet your financial obligations. Moreover, late payments can damage your relationships with customers and make it harder to get paid in the future.

Another challenge of accounts receivable is dealing with customer disputes. Whether it’s an error on your invoice or a disagreement about the quality of your product, disputes can delay payment and tie up valuable resources. In some cases, they can even lead to litigation.

If a dispute does arise, try to resolve it quickly and amicably. A quick phone call or email exchange can clear up the problem. If you cannot resolve the dispute, you may need to involve a third party, such as a mediator or lawyer.There are ways to manage these challenges and manage your accounts receivable effectively. By taking a proactive approach and implementing some best practices, you can keep your operating costs down and avoid many pitfalls that businesses face.

If you’re like most businesses, a large portion of your revenue comes from accounts receivable. And while it’s necessary to have a healthy AR to keep your business running smoothly, it’s also essential to keep an eye on your AR expenses. After all, if your AR costs are too high, it could be eating into your profits.As you’re troubleshooting high operating costs in accounts receivable,