Companies and businesses have changed significantly since the COVID-19 epidemic. Nowadays, as companies continue to progress, they adapt to the relevant standards by coming up with fresh strategies to address shifting market dynamics and client demand. In these critical situations and dealing with the long-term effects of the same, best practices to improve the efficiency of accounts receivable management have become more crucial. It can evidently enhance the company’s cash flow and economic condition.
Due to a shortage of anticipated cash, businesses are forced to take out the money from another source or reserve that was intended for some other purpose. If you own a company then you need to focus on collecting your account receivables and at the same time, you will have to collaborate with your suppliers, customers, associates, etc.
Keep track of all debits and credits for better business accounting.
Whenever a business or company declares bankruptcy, they generally go through problems due to ineffective accounts receivable management and as a result, they become unable to get its consumers to pay what they owe. In this article, we will discuss how companies and businesses can employ accounts receivable management best practices in times of crisis and get better results through the same.
How to elevate your company’s accounts receivable management at the time of a predicament?
Here is a list of accounts receivable management best practices that can enhance the accounts receivable strategy of your company or business amid a crisis.
Analyze your company's handling of accounts receivables
Every time a crisis arises, cash flow management, also known as accounts receivable management best practices, should be prioritized. Previous financial sources may become inaccessible amid tough moments and that is why as a company owner you need to make sure that your funding options are still viable. While the economy is thriving, many firms forget about their accounts receivables, nevertheless, at the time of a crisis, any company or business should speed up the collection of their account receivables to perfectly manage their cash flow.
Therefore, a thorough collection audit and evaluation of the accounts receivables management are required for every company to remain in a good shape. The customers whose payments are due should be contacted by your company and requested to clear their payments. Also, make sure your company’s accounts receivables department is collecting the appropriate amount for the goods and services you provide to the customers.
Provide discounts to the customers for paying the bills in full or for advance payments
Even in a time of crisis, there will be customers that are prepared to pay the overdue amount of their invoices and your business can easily accept it. You should also think about providing the customers who are willing to pay in full or in advance a sufficient discount. Not only will this encourage your customers to pay your business immediately to save some money, but this will also guarantee that the cash flow of your business is not severely affected by the crisis.
Offer effective and flexible payment plans
To enable customers to pay on time, the payment terms of your company must be reconsidered, especially during a crisis. This is an extremely crucial step you need to take if you frequently have to follow up with customers who owe you money. To improve the efficiency of your accounts receivable department, you must follow up with the accounts receivable management best practices and contact each of your customers.
Ensure that the accounts receivable process are reviewed regularly
During a crisis, keeping control over the cash flow becomes a challenging feat and during these times it is essential for you to regularly evaluate the accounts receivable of your company and accounts receivable turnover more frequently than usual. This can help you become more aware of the adjustments that occasionally are necessary for the financial health of your business.
As a business owner, it is necessary to comprehend the current financial situation of your customers. This will help you to ascertain if your customers require a modification to their existing payment schedule, are looking for any kind of extension, or have the ability to pay the entire money of the bill by the due date.
Ensure that your clients' creditworthiness is regularly reviewed and their credit limits are adjusted when necessary.
Issue an extension if required
Given the seriousness of the issue, a lot of customers may become unable to pay you back the money owed for several different reasons. For example, some customers may not have sufficient cash and are facing problems themselves, others may not have any income sources through which they can return your money.
In these cases, you should think about keeping payment deadlines for an additional two to four weeks if some of your customers are unable to pay. It will be preferable for your business if you design the credit extension in accordance with your own specifications. Otherwise, individually evaluate each customer’s needs and circumstances before providing them with any kind of extension.
Offer multiple payment options for your customers
The unhappiness of customers with payment systems frequently makes payment delays worse for any running business or company. Therefore, it is important to make the payment system easier to get regular payments. To improve the company's payment system, you should offer multiple payment methods. In recent times, customers find an electronic money transfer system to be far more convenient and easier to use instead of the traditional banking payment system.
Have a better understanding of your customer
You must be sensitive to your customer's needs and requirements in a time of crisis. Some of your customers may not be able to pay you the money owed (for genuine reasons), while others can. Determining your company’s total accounts receivable is aided by customer follow-up. Try to give your customers your complete attention and services at difficult times, and they will value and remember your genuine concern for them once things have settled down.
Outsource the account receivable management system of your company
The management of any company’s accounting activities is crucial to maintaining market success. Due to this, accounts receivable outsourcing is the best option for the majority of businesses. Companies like IBN Technologies can help you with accounts receivable management best practices because they have been offering their services in this field for more than 22 years.
Managing any company's accounts receivable requires routine and trustworthy investigation and tracking because there are daily receipts to input and receivables to keep track of and IBN Technologies can help you with the same.
A sample of how you can compare your accounts receivable collection data.
Always notify your customers and keep them updated
While running a business or company, the most important thing a business owner has to do is to look after their present customers while luring in new customers while offering them impressive opportunities. Always keep your customers posted with updated information on their orders and also inform them about your company's progress. In difficult times, maintaining an existing client is more affordable and less expensive than looking for new ones. You should also directly communicate with them if you think there will be any delay regarding their orders.
Focus on keeping your regular clients happy even when it costs you a little bit of extra money since they regularly contribute to your sales. When it comes to receiving payments, it is possible for you to get payment from your present clients at the time of crisis than from a new client since you currently have a fruitful connection with them. You will also have to be very honest when accepting payments if you want to continue to have a solid business relationship with your customers.
Due to the COVID-19 pandemic, the world economy has gone through a major crisis. It has affected financial transactions, business operations, and trade. Cash balances have become more crucial than ever, nevertheless, as companies worldwide continue to function while abiding by crucial regulations for the safety of their staff it has become extremely essential to abide by the accounts receivable management best practices.
Companies should practice better strategies in striking a balance between getting paid for services rendered and at the same time keeping their customers happy. Complete openness and effective consumer communication are crucial as part of the accounts receivable management best practices.
In order to make strategic, suitable, and financially sound business decisions, business leaders also require a real-time perspective of the financials which can be done through outsourcing your accounts receivable management. Companies like IBN Technologies are the leading figures in this field and can efficiently help the companies manage their cash flow.
Frequently asked questions
1.Are accounts receivable considered credit or a debit?
Accounts receivables are usually included as assets on a balance sheet since they are funds that are short to be paid to your company because of the invoices that you have sent to the customers and you will profit from them.
2.How are accounts receivable entered?
If your company has made a sale for which there has been no payment yet is referred to in accounting as accounts receivable. An accounts receivable transaction is recorded in the company's accounting records as an accounts receivable journal entry. In order to accurately record this financial transaction, it is an extremely essential step.
3.How do you classify account receivables? Are they assets or liabilities?
Accounts receivables are reported in the current assets part of any company’s cash flow statement. These are debts that customers owe to any particular business and they can be turned into cash in under a year. Therefore, accounts receivable are considered an asset for the issuing companies.