Here are just a few tips to get you started:
- Keep track of outstanding invoices: This will help you stay on top of payments and collections.
- Send timely reminders: Don't let invoices fall through the cracks. Instead, send payment reminders promptly to ensure that your customers are keeping up with their payments.
- Stay organized: Develop a system for tracking payments and invoices. This will help you stay on top of your AR and avoid missed payments.
- Use an automated AR management software system: Automation can help free you from critical tasks like sending invoices and reminder emails.
By following these AR best practices, you can take control of your accounts receivable and ensure that your business is getting paid on time. Implementing an effective AR management system can save you time and money, so it's worth finding a solution that works for you.
4. Accounts receivable isn't simply a cost of doing business.
Accounts receivable refers to the outstanding invoices on which a company has yet to collect payment. Though it's considered an operating liability, it's really an asset because it represents money owed to the business. Accounts receivable financing is one way businesses can leverage this asset to get the cash infusion they need to grow.
Here's how it works:
- A business owner applies for financing and provides AR invoices as collateral.
- The lender then gives the business a cash advance, which is typically a percentage of the total value of the invoices.
- Once the customers pay their invoices, the business repays the lender, plus interest and fees.
AR financing can be an excellent option for businesses that need capital but don't qualify for traditional loans. It's also helpful for companies that have maxed out their credit lines or are looking for an alternative to bank loans.
If you're considering accounts receivable (AR) financing, compare lenders to find your business's best rates and terms.
5. Accounts receivable isn't bad for your business credit score.
Many business owners are concerned about the impact of their accounts receivable on their business credit score. However, there is no need to worry - accounts receivable actually has minimal impact on your score. The main factor determining your score is whether or not you make your payments on time.
AR only comes into play if you have delinquent accounts (bad debt), which can damage your score. In addition, even if you do have delinquent accounts, you can still take steps to improve your score by paying down your debt and maintaining a good payment history going forward. As long as you stay on top of your payments, you should have no trouble maintaining a solid business credit score.
6. You lose money by waiting for customers to pay their bills.
You're giving your customers an interest-free loan by waiting to get paid. If you're a small business, that can put a strain on your cash flow. Nearly half of small businesses have struggled with late payments. The good news is that you can do some things to help you get paid on time.
- Most importantly, be clear about your payment terms from the start.
- Make sure your invoices include all the relevant information, such as when payment is due and any late payment fees that may apply.
- Set up automatic reminders so you don't have to chase down payments yourself.
- Finally, consider offering a discount for early payment. This can incentivize your customers to pay their bills on time and help you improve your cash flow.
Finally, consider offering a discount for early payment. This can incentivize your customers to pay their bills on time and help you improve your cash flow.