Steps to Improve Receivables Management.

Delayed payments and outstanding receivables are the most common reason for cash flow crises faced by businesses in the UK. Inefficient Accounts receivables management has a big concern for the UK business. According to a survey conducted by Santander Corporate and Commercials, one out of 6 small businesses is more concerned about their cash flow management due to the piling of bad debts.

Then how can business handle their credit better and improve their collection cycle?

Companies that have to prioritize their AR management and address the cash flow issues can tackle it effectively. Businesses need to optimize the AR process and follow best practice implementation for long-term growth.

Here are some simple accounts receivable management tricks that can get you payments on time and have better cash flows:

Proactive Collection system:

 Businesses often commit the mistake of not prioritizing the billing. It ensures that its staff or team members know the importance of cash flows into the business. Having a system of proactive billing as soon as the product or service reaches the customer increases the chances of timely payments.

Simple and Clear invoices:

Customers often delay payments when they get invoices that are either complex or generic. Ensure that the invoice generated specifies the total amount with a proper breakdown of the products and services delivered. Implementing a fixed billing system for recurring payments from the customer also ensures receipt of payments on time.

Set out terms and conditions:

When you deal with customers, ensure that they know the terms and conditions of the credit. Also, do provide a concise document that outlines the payment terms. It is also necessary to have written acceptance from the customer of the terms and conditions of your business. Clear communication between both parties regarding the payment timelines and late payment penalties is important.

Easy payment system:

Provide your customers with multiple payment options so they can choose the most convenient options for the payment. Access to comfortable payment options improves their overall experiences and increases the chances of time payments. Acceptance of payments from digital payment methods such as ETFs, PayPal, credit cards, etc. in addition to traditional methods of cash and check ensures completion of payments on the due date.

Follow up:

Follow is the most crucial and delicate part of the AR process. Often the finance department assumes that the issue of invoices will automatically get you payment from the customer. But there are chances customers might delay payments. So it is necessary to have a follow-up system that periodically sends payment reminders to the customer politely and professionally.

Switch to Cloud software:

Managing your accounts receivables in Excel is a redundant and outdated method. It won’t help much in speeding up the collection process. Cloud Accounting software such as Xero, and QBs online will take your AR to the next level. It automates the AR process through functions such as time tracking, invoice generation, automating recurring invoices and follow-up reminders, etc.

Outsource the AR management to Meru Accounting

Meru Accounting is known for providing highly effective accounts receivables management services to businesses across the UK and other countries across the globe. We provide the best combination of professional experts, the latest technology, and processes to meet our clients’ unique organizational needs and provide solutions while revamping the AR system.

Contact us to explore more about our AR outsourcing services and enhance your AR system.

FAQs

1. Why do late dues cause cash flow stress?
   Late dues lock up cash that firms need for pay, rent, and growth. When pay lags, even firms with gains can face short gaps in day-to-day cash.

2. How can I make invoices easier for clients to pay?
   Use clear and simple invoices that show the due date, a detailed cost breakdown, and your payment information. This helps clients pay quickly and reduces questions or delays.

3. Do written payment terms really matter?
   Yes, when both parties agree on terms in writing, there’s less chance for confusion. It also gives you a reference point if clients pay late.

4. What payment options increase the chances of on-time payments?
   Use a card, bank send, PayPal, or web pay. These make it easy for clients to pay, speed the cash cycle, and cut delays.

5. How often should I follow up on overdue bills?
   A polite follow-up should start as soon as an invoice is past due. Regular, friendly reminders keep payments on the radar without damaging the client relationship.

6. Can small firms afford cloud AR tools?
   Yes. Tools like Xero or QuickBooks Online are priced for small companies and save time with auto-billing, reminders, and reports. They often cost less than the money lost from late payments.

7. What’s the first step to improve receivables in my company?
   Begin with discipline in billing. Send invoices on time, state clear terms, and track each due payment. Once this foundation is set, technology and follow-ups can help speed up the process.