So you’ve managed to gain new wholesale clients and have retained more of your existing customers. That’s great news! And yet, despite your growing clientele, you’ve noticed that you're still not getting the revenue you were hoping for. If you’re wondering what might be causing this discrepancy in your sales, it might be a good time to check the way you manage your cash flow and your accounts receivables.
Accounts receivables (AR) refer to the amount owed by a customer to a business in exchange for products and/or services on credit. Managing this properly allows you to collect payments better and improve your business’ cash flow.
Cash Flow and AR Management
It’s important to understand that not all your customers will be able to pay on time, all the time—and this is where things can get tricky. Most businesses share this common problem when it comes to managing their cash flow.
Here are 7 ways to help improve your AR collection:
1. Create an AR aging report
An AR aging report will help you track and measure the payment status of all your customers. This will give you better control over your collection efforts and determine the status of all your accounts receivables.
2. Be proactive in invoicing and collections efforts
It’s crucial that all parties (this includes you, your customers, and your bank) are on the same page regarding payment deadlines, amounts owed, and payment methods. Ensure that you're making it as easy as possible for your client to pay invoices.
3. Move fast on past-due receivables
Studies show that the longer receivables go uncollected, the less likely they are to ever be collected, either partially or in full. That said, you must be able to reach out to your clients on the first day that their payment is late. Consider setting payment reminder notifications to prevent them from getting overdue.
4. Consider offering an early payment discount
Sometimes it boils down to turning a potentially negative experience (payment collections) into a delightful experience. Something as small as a discount for early payments could greatly encourage your customers to settle their payments.
5. Consider offering a payment plan
Your customers may be going through something with their business and this may be the cause behind withheld payments on their outstanding balance. Consider helping them by arranging a payment plan that makes it easier to fulfill the payment. It’s also important for you to put the plan and its terms and conditions down in writing so that both you and your customer can sign it. You can also, make all future sales cash on delivery (COD) until the past-due amount is paid in full.
6. Diversify your client base
If you have a few large clients who typically pay outside of a 30- or 45-day window, focus on acquiring additional smaller clients and ensure that they pay on time. This is so that your cash flow remains healthy while you wait for the longer-term payments.
7. Look for cash management tools
Banks offer a wide range of cash management services that can help you improve collections and better manage your cash-flow cycle. Implement electronic payments for your clients through Automated Clearing House (ACH) so they can pay electronically and boost your cash flow immediately.
The Future of AR Management
Speaking of tools, there are a number of AR management tools and software available out there for you to consider. Their functions can range from simple single-entry apps for check writing and bookkeeping to more advanced double-entry systems that include a general ledger. Sophisticated platforms offer extra features such as inventory, fixed assets, invoicing, and more.
One of the key features that is still growing in terms of development and function for AR management software is automation. Gone are the days of manual reminders and collection notices that are prone to errors. Companies today are embracing technology in order to reap the benefits.
In 2018, 61% of all companies fall delinquent on their payments due to invoice errors, missing information or other AR errors. This highlights the importance of keeping AR management as tidy as possible, and automation is the way to do it.
Here are the top accounts receivable software to help you manage and automate your cash flow:
Anytime Collect automated accounts receivable software puts the entire A/R process on auto-pilot, allowing collectors to save time and focus on building key customer relationships.
Users are able to automate email, including the attachment of supporting documents such as invoices, purchase orders, and more. The available online bill pay feature allows customers to settle payments by clicking on an email link that lets them enter a secure payment portal.
Anytime Collect also has a prioritized action list that informs you who to prioritize. It also lets you know whether they need to be called or emailed, and even provide their account information and past communication notes.
SAP S/4HANA Finance
SAP’s ERP financial software runs on the in-memory platform of SAP HANA. It supports financial planning and accounting, accounting and financial close, treasury and cash management, accounts payable and receivable, risk management, and more.
Gain real-time financial and operational visibility throughout your business and leverage comprehensive financial controls to ensure security and compliance. Streamline your business processes using extensive automation to reduce labor, and save costs.
The Sage Intacct system includes accounting, cash management, purchasing, vendor management, financial consolidation, revenue recognition, and subscription billing. It also features contract management, project accounting, fund accounting, inventory management, and financial reporting applications, all delivered through the cloud.
A modern billing system that gives you billing superpowers. Invoiced automates the most tedious billing tasks, like sending out invoices on time, following up with customers, and reconciling incoming invoice payments.
With this software, you can tackle more complex billing processes, like recurring billing and payment plans.
From invoice presentment and payment, through to collection and cash application, VersaPay ARC helps companies improve their customer experience and get paid faster.
Increase the automation, centralization, and visibility of your AR process while providing customers with a class-leading AR experience. ARC enables a self-service portal where customers can access invoices, make payments and collaborate with your team in real-time. Collections task lists are replaced with 150+ intelligent notifications, reducing manual effort by 70%.
Tesorio is a cash flow performance platform that collects and organizes the critical factors impacting cash flow, including information from ERP software, bank accounts, and emails.
Using machine learning, Tesorio analyzes this data and gives finance teams actionable insights and automated workflows for better managing, predicting, reporting and collecting cash. Tesorio’s intelligent platform includes applications for cash flow forecasting, collections management, and automation, spend analysis, and currency exposure management.
Accounts Receivables Managed
Without a doubt, something as intricate as managing accounts receivables can be overwhelming.
But the good thing about AR management is that the tools to help you tidy it up are widely available if you know where to look. And once you find the right software to answer the needs of your business, you’ll be more confident in handling and managing your company’s accounts receivables and save your cash flow.
Here at Sweet, we have created a B2B portal with accounts receivables management features like payments support, ability for customers to view their balances, and robust 2-way sync integrations with accounting platforms QuickBooks Online and QuickBooks Desktop. To find out how we can help your business with implementing these apps, sign up for free here.