Must Read: Accounts Receivable
The money owed by you to your customers for provided products and services – Accounts Receivable.
Many people would find it amazing if all the payments are done in cash and would be completed immediately after the order placement. Unfortunately, this suggestion is beyond organizational policies. Instead, the invoices generated are sent to the customers. However, in the business world, some are dead-beat customers whereas some are on-time payers.
This is the situation wherein the phrase Accounts Receivable and its Services came from. In reality, accounts receivable is the amount that your customers/clients owe to you for the services provided. Essentially, it is a total of the invoices generated but not paid yet.
At the time when the businesses are busy calculating the company’s financial statements, the accounts receivable records will demonstrate in your balance sheet calculations as an asset.
Why is Accounts Receivable Important?
While tracking the account receivables, it is important and crucial to manage the cash flow happening. While sales might be skyrocketing and the accounts receivable are growing, if your customers are not paying you quickly, you may struggle with the cash crunch.
This is why fast business growth and expansion might be a little challenging and tiresome, if not managed properly. While making sales and service delivery extensively, delay in payments can hamper this growth. Also, this needs to be tracked to handle any crises.
Not only should the total accounts receivable be tracked but also the approximate payment deadlines provided should be noted down. With this tracker, the businesses can also decide which customers to chase down for payment and keep your bank account away from crunch.
Higher vs lower accounts receivable
Generally, a lower accounts receivable balance is better. This implies that your clients are paying you faster and you do not owe much money. Said this, if your organization is growing, you need to note down your accounts receivable balance grow to get more customers and sell your services more.
How to improve your accounts receivable?
Offering some lucrative discounts allows the clients to pay faster. While letting your customers pay as per their convenience, you are also providing interest-free borrow. Instead, you can also encourage them to pay quicker with early bird offers.
With establishing a business line of credit, you can pay the bank for the interest money from your line of credit and additional fees. The line of credit is the deadline that you chose for the clients for the payment.
Instead of spending your precious time chasing clients for payments, you can always outsource the collections for accounts receivable. These accounts receivable services don’t loan any money but will assist you to extract the owed money. If required, they can also reach out to customers for overdue payments and will assist you to grow your firm seamlessly.
Tracking accounts receivable is one of the crucial problems that need to be addressed while managing your company cash flow. You will also get to know about the amount you owed, who are the clients, and which ones need to be followed up with.
Following the right strategies for accounts receivable management, you will be able to maintain a considerable amount of cash for business’ requirements.