The biggest challenge faced by any large or small business, more than sales, branding or expansion, is to keep it buoyant. And one way by which you can keep your business afloat is by ensuring a steady cash flow. A business can sail through highs and lows of profit generation, but it cannot survive an unstable cash flow. To provide that buoyancy, you need to have a proper Receivables Management solution.
What is Receivables Management?
Receivables Management or Managing Accounts Receivables is collecting dues from the buyers/ customers/ clients of your business in time to cut a long story short. It is the most vital part of your business’s financial health. Ensuring sales is the first step towards the financial sustainability of a business. To translate the sales strategy into steady cash flow, every business needs to manage Accounts Receivables par excellence.
A business offers goods, services or solutions to the consumer/ client in exchange for money. Collecting that money from the consumer is known as Receivables Management. The customers owing money to the business are called ‘sundry debtors’, in accountancy parlance. They are called ‘debtors’ because they owe money to the company for their products, services or solutions.
There are only a few companies that have the privilege of selling products or services for advance payment. Most businesses make sales on credit, i.e., they offer the products/ services first and collect the payment dues for these products and services later. The entire process involves:
- Defining your credit policy
- Settling payment terms
- Payment follow-ups
Easier said than done, without proper planning and up-gradation of the Receivables Management program, your business can become a sinking ship with intermittent cash flow.
Objectives of Receivables Management
To ensure a steady inflow of cash, Receivables Management becomes an integral part of your business strategy. The objectives are to:
- Collect receivables from sundry debtors
- Ensure the collection takes place on time so that the creditors of the business can be paid back on time
- Devise a credit management policy best-suite for your business model
- A functionality to monitor and manage timely follow-ups/ payment reminders
Steps to Improve Receivables Management
Create an Accounts Receivables Aging Report:
It is pertinent to have a bird’s eye view of your dues. Creating an AR Aging report will give you a clear picture of who owes you how much after how many days of the issuance of the bill.
Accounts can be segregated by the number of days since the invoice was issued:
- 0-30 days
- 31-60 days
- 61-90 days
- more than 90 days
The report also tracks the figure that is due against each entry under the above-mentioned categorisation.
Ensure Timely Payments
It is essential to track and follow up with the customers/ clients for timely payment of dues. If you do not receive the dues on time, you won’t be able to return the funds to your creditors. Put up a timeline as part of your credit policy before any business transaction.
Consider Offering an Early Payment Discount
To ensure timely or before-time payments, incorporate a fair discount offer on early payment in your credit policy. This will encourage the sundry debtor to come clean of the debts on time to avail of the discount.
Offer a Payment Plan
Business is also about customer retention. If one of your regular customers informs you about a cash flow challenge that might be keeping them from making the payment on time, make provisions for giving them some leeway. Keep a backup payment plan ready, devise some payment terms mutually agreed upon by you and the sundry debtor and you and close the agreement. Make sure you do not risk your credibility while cutting the sundry debtor some slack.
This is the first rule of financial management. Be it investment or management of your business funds, never put all your eggs in the same basket. Diversifying the client base will ensure that all your cash is not stuck with one type of consumer. For instance, if you have a few large clients who usually pay outside of a 30 to 40-day window, get a few additional smaller clients, ensuring they pay on time.
Make Accepting Payments Easier
Whether it is a cash transaction or a digital transaction, make sure you put up a smooth payment process for your client. Simplifying the collection process prompts quick payments.
With all the business operations going simultaneously, tracking Accounts Receivables can be a necessary but added burden. To save time and effort, outsource your Receivable Management needs to third-party service providers like Imprezz.
A digital financial management software takes care of all the pain points businesses faced during accounting and bookkeeping. Imprezz is one such fintech solution that takes care of all your financial management needs under one roof. Issuing invoices, tracking payments, and following up with payment reminders, Imprezz covers it all.
How Does Imprezz Help in Managing Receivables
Outsourcing Accounts Receivables is the most feasible solution to optimise your REceivables Management strategy. It saves the firm’s time, resources and money while providing an efficient and effective solution to this vital pain point of any business. Softwares like Imprezz can prove to be game-changers in this domain. As an outsourcing partner, Imprezz can take care of the different aspects of your Accounts Management needs, like
- Advanced Billing
- Payment Reminders for following up
- Updating offer discounts on early bird payments
- Managing multiple payment options
- Imposing penalties in case of missed payment deadlines
All this and much more, with the live tracking and payment reminder features, the Imprezz software ensures that every penny coming into or going out of your account is accounted for. Visit their website, learn more about its offerings, and make this smart addition to your financial management strategy today.
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