Effective Accounts Receivable Process

Implementing credit checking has many benefits. However, it does not guarantee that debtors will pay their accounts on time. It depends on your retail business to ensure it has solid receivables processes in place.

An efficient receivables process is characterized by: 

• the establishment of clear credit terms at the outset of a relationship
• prompt issuance of invoices
• tracking of accounts receivable that will help you identify slow-paying customers
• regular communication with customers in order to identify and resolve problems before invoices become overdue
• action taken against a debtor if they are persistently delinquent. 

Many smaller businesses don’t have the capability or capacity to manage the accounts receivable process internally. If this is the case you shouldn’t be afraid to use the services of professionals by outsourcing the debt to a reputable collector.

With the end of the financial year fast approaching the time that all business strive to get their house in order has come. A more complete picture of your retail businesses’ incomings and outgoings, and a better understanding of your customers’ financial health will help your business to free up funds for growth. In both good economic times as well as bad this simply makes good business sense.

Top tips for managing cash flow: 

• Always develop a cash flow projection and monitor and update it regularly
• Minimize bad debts through an established credit assessment procedure
• Establish an accounts payable policy at the outset of every credit relationship
• Manage your invoice process and collections practices
• Re-arrange annual payments so you pay small installments frequently – it helps you  to smooth out lumps in your cash flow cycle
• Use short term cash surpluses wisely – don’t keep them in accounts that don’t pay interest

See also Improving My Cash Flow.