Managing Your Accounts Receivable

Wouldn’t it be great if all customers paid promptly, in the full amount, and never had to be reminded about payment? Then you would never be worried about how to provide commercially attractive payment terms that did not end up threatening your cash flow.

Let’s think about how payment time affects your business. Remind yourself that invoices represent money that is actually yours. What would it mean to your business if you had that money on hand and you could use it for purposes such as investing in your business or paying the next installment on equipment or supplies recently purchased? Money outstanding is your money that you could be using profitably. Carrying too much in the way of receivables can endanger your cash flow and your business survival. It absolutely needs to be managed.

Below are some straightforward rules you could be operating by to prevent excessive receivables and reduce the amount of time receivables remain outstanding.

*Develop a credit policy.
*Send out invoices promptly.
*Be systematic about tracking accounts receivable.
*Measure the key performance indicators, such as average days to payment.
*Take action on accounts immediately that go past due date.
*Build good payment habits among your customers.

Find ways to help your customers meet their financial obligations. You will protect your client relationships while safeguarding your cash flow.