How Accounts Receivable Management Can Make or Break Your Business

September 19, 2021

Offering generous credit terms to clients is an excellent way to attract more business. The tough part is ensuring you get paid in full and on time, so you can meet your own financial obligations. Because of this, accounts receivable collections management is one of the core deciding factors of whether a business is successful. Navigating collections can certainly start to feel like rocket science, but there are some accounts receivable best practices that simplify the process.

What Does It Mean To Manage Your Accounts Receivable Collections Process?

You likely know the importance of managing your collections process, but do you have an active and actionable plan in place? Proper management involves creating a deliberate plan to ensure your clients pay their invoices on time. The more invoices you handle each month, the more important this is. An efficient collections process reduces the likelihood of a handful out of hundreds or thousands of monthly invoices slipping through the cracks.

Business owners know they have a good management process when it leads to good results. The primary goal is to reduce the risk of delinquent clients and overdue balances. It also includes relationship management. While payment is crucial, it’s also important to consider the long-term relationship with key clients. In some cases, your accounts receivable professionals may also need creative solutions that meet your clients’ needs.

How To Know if Your Company Has an Inefficient Accounts Receivable Collections Management Process

If you have a deliberate management process, how well has it been working for your business so far? The risk of delinquency varies across industries and business types, so you need to determine an appropriate average to use as a benchmark for your business.

These factors indicate the need for a new collections plan:

Bad data
Continuously late payments
High days sales outstanding ratio

How Bad Data Can Derail Even the Best Accounts Receivable Strategies

Tech companies and marketing professionals often describe data as “the new currency.” Data collection and use are behind the success of some of the most successful companies, including Amazon, Netflix, and Google. However, the ability to harness data for the benefit of your company will depend on how accurate that data is.

If you’re still using old spreadsheets and manually entering information, the risk of bad data is high. It only takes one small error to throw off an entire spreadsheet. Inaccurate information could cause you to miscalculate a client’s level of risk or make it impossible to accurately judge which clients are paying invoices on time and in full.

When clients suspect you’ve lost touch with what’s going on, they are far more likely to push the payment to your business to the bottom of their priorities. Good data keeps your strategies current and boosts effectiveness.

How To Improve Accounts Receivable Collections

If you feel frustrated by the current state of collections at your company, you’re not alone. In fact, unpaid invoices are one of the top reasons small businesses struggle with maintaining a healthy cash flow. These are some of the steps you can take to reduce the likelihood of your organization experiencing these difficulties, regardless of size:

Address complaints and/or other issues involving clients to reduce the risk of them withholding payment.
Create and maintain strong relationships to create loyal clients.
Dedicate resources to the management of your accounts receivable process.
Monitor accounts regularly to determine potential and actual delinquencies as soon as possible.

…and harness the power of technology to simplify your process.

Why Gaviti Is the Best Among Accounts Receivable Collections Tools

An automated accounts receivable collections process is your best bet for simplifying your collections efforts. This is exactly what Gaviti helps you achieve: automated delinquency calculations, communications, and payment options. Are you ready to get started? Request your free quote and book your demo today.