What do you do when you have to pay your employees, purchase stuff for office or for money to keep your business up and running? Dig into your working capital of course. To keep your business running, you need to have a positive working capital at all times, which means well managed AR and AP. Of these AR is tougher to manage, simply because it requires you to depend on others, namely clients and customers. But it doesn’t have to be so tough; learn how you can handle accounts receivable management effectively.
- Research Potential Client’s Financial and Credit History before Doing Business– A thorough evaluation of a potential client’s financial and credit history can go a long way in ensuring you don’t end up in a messy situation. Talking to representatives of other companies they have done business with or businesses that outsource receivables is also a good idea. If you find that the company is in debt and is obviously struggling to make payments, you can act accordingly.
- Clear Payment Terms and Information– Clarity in payment matters is important when doing business. Make sure you and your client are clear on the payment terms and provide an estimate of costs well in advance.
- Use Electronic Invoicing Facilities– How many times have you forgotten to send out invoices? Use electronic invoicing and you won’t have to worry about this ever again. Your invoices can be sent out as soon as your projects are completed and you can also be sure that the invoices reach the client without fail; no more getting lost in the mail.
- Use Multiple Payment Options– Payments may also be delayed if your modes of payment are inconvenient for clients. Offering multiple modes of payment will help to facilitate faster and timely payments.
- Outsource Receivables Management– Proper AR management is vital for your business to run smoothly. If you do not have the resources or time to devote to accounts receivable management, it would be better to outsource it, simply because you cannot afford to have AR ignored. Invest in a good account receivable management company and you won’t regret it.