Accounts receivable management incorporates is all about ensuring that customers pay their invoices. Good receivables management helps prevent overdue payment or non-payment. It is therefore a quick and effective way to strengthen the company’s financial or liquidity position. This Wiki explains the importance of receivables management, the benefits and how to prepare a good receivables process.
Every company wants to buy low and sell high. But they can lose everything with poor receivables management during the last phase of the sales process (payment). Over half of all bankruptcies can be attributed to poor receivables management, which demonstrates its importance. Receivables management involves much more than reminding customers to pay. It is also about identifying the reason for non-payment. Perhaps a product or service was not delivered? Or there was an administrative error in the invoice? Good receivables management is a comprehensive process consisting of:
Good receivables management directly contributes to a company’s profit because it reduces bad debt. The company also has a better cash flow and higher available liquidity for use in investments or acquisitions. Furthermore, good receivables management boosts a company’s professional image.
In principle, good receivables management involves two steps. Firstly, you determine your strategy and then you specify the appropriate procedures.
Companies use different applications and systems to limit the risks and update the data. These can help you set up and design your receivables management.
Automating receivables management allows you to link all the above systems. This improves workflow efficiency and provides better insight by generating cash flow and customer reports. Automatically linking credit information reduces the percentage of non-paying new customers. By automatically integrating the debt collections in the process, the percentage of non-paying existing customers also falls.