Unlock the cash tied up in your accounts receivable

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One of the most frustrating things for any business is knowing that your cash is tied up in accounts receivable. It puts a strain on your operations and leaves your business without the necessary cash to cover it’s outflow obligations. 

While most organisations have accounts receivable policies that dictate when to bill and when to collect, it is unfortunately not always followed. 

In today’s article we tackle some of the ways you can stay on top of your accounts receivable: 

1. Evaluate Payment Terms:

Before establishing credit terms for your clients, map out your own internal cash flow needs and use that as the basis for establishing your credit terms with clients. 

An accounts receivable analysis performed by an accounting provider can show you the relationship between the unpaid invoices and business bills with their respective due dates. This will help you understand how many days invoices are outstanding. 

General rule of thumb is credit extending  beyond 60 days is a red flag and should be watched out for.

2. Invoice Promptly

Every organisation has it’s own processes when it comes to approving invoices. By invoicing promptly you will allow your clients to get through their internal approval process much sooner and it reinforces your company’s image of being professional. 

If your customer gets into financial challenges and their accountants have to make a decision on who to pay first, they are less likely to delay payment to a company that takes accounts receivable seriously. 

3. Monitor

Depending on the payment terms established for your clients, you can set reminders to follow up with them if payments are running late. You can further automate this process by selecting a day in the week to review all accounts receivable and send reminders to clients to make payments. Keeping on top of all overdue accounts receivable is central to sustaining a positive cash flow.

At CRESCO Accounting, we have an easy to use portal that enables our clients to stay on top of their accounts receivable by showing them their overdue accounts in a simple digital format. You can enquire about our portal here

4. Ask client to pay costs of delayed payments

Change the wording of your standard contracts and include a delayed-payment-fee clause. This will allow you to charge an extra amount, if the client is not paying on time, which covers your extra work to run after the money and to finance the delayed inflow of the payment. Our sister firm CRESCO Legal can help you draft this clause.

5. Collection & further action

With ever fluctuating global markets, sometimes your clients account may be heading towards trouble and you have to make the harsh decisions on what actions to take regarding overdue or no payment. 

It’s important to maintain a balance between collecting payments and maintaining the integrity of customer relationships. 

You could consider offering them a payment plan or grant a small extension in exchange for interest. 

In the event that you are still unable to get payments from clients, you can contact a debt collection & recovery services Smart Money  to assist. Use CRESCO Accounting as a referral to receive a discount on claims recovery services. 

At CRESCO Accounting, we can help your organisation manage your accounts receivable and streamline your cash flow, so that you can prevent any outstanding invoices from turning into bad debts. 

Send us an email to enquire about our accounting packages and more specifically accounts receivable analysis info@crescoaccounting.com 

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