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Is Your Account Receivable Ready?
Cautiously handling the accounts receivable is a crucial part of maintaining the business and its smooth running, not taking proper care can lead to an unavoidable cash crunch.
FREMONT, CA: The strategy of offering flexible or affordable credit terms can help the companies to lure customers away from the other competitors. Companies need to provide credit as an essential aspect of your operation where customers, in general, will not pay for the services before they are delivered, which can create a credit factor built into the pricing.
Since most of the customers do not pay bills on time, having a dull account receivable (AR) collection process can cause serious cash flow problems due to late payments. Secure AR aging helps to watch over the warning signs as well as avoid cash flow problems in the future. It is necessary to upgrade the AR collection process if the companies face the following issues:
• It is ideal for sending the first late notice on the day the bill is past due to ensure customers pay attention and know that they are under observation. To wait for a long time like a 90-day mark to send a late payment reminder can only reduce the chances of getting a payment soon.
• A partial payment could indicate that the customer has a cash flow problem, and the company must follow up immediately to make sure they have no misunderstandings with the invoice.
• Another sign of irregular customer payment is when the company is having a day’s sale outstanding (DSO) longer than the industry average, which can lead to a tremendous loss for a small business.
• In cases where customers ignore the notices and create financial difficulties for the company to maintain, the authorities should take legal or aggressive action against them.
Keep Your AR Current:
It is essential to build a robust and dependable collection system as the foundation to keep the accounts receivable in proper check with careful planning. The company needs to follow a customer’s report from the point of credit approval until all the payments are made.
To keep the AR an asset, companies should suggest clients for ACH payments encouraging cashless transactions and manage every process actively. Businesses should provide discounts and incentives, and with no time should put an end to the services if the customer does not adhere to the credit policy.