Running a business successfully and to its full potential requires many things. So, while hiring top talent and investing in cutting-edge technologies is important, none of this would make sense if the efforts don’t reflect in the cash flow statements.
One of the most common problems that the CFOs are facing today is a disorganised account receivable collections process. Due to the lack of a comprehensive strategy, invoices often remain unpaid for as long as 3-4 months which can be dangerous for their organisation’s financial health.
Contrary to popular belief, it’s not a herculean task to maximise accounts receivables. The key is taking a variety of measures that work to improve the system. These are:
Removing Payment Roadblocks
A lot of times, delays in invoice clearances is simply because of limited payment channels. Most companies prefer online payments but even then, there is a huge variety available and there is a preference involved. For instance, some may prefer credit/debit cards, while other payment service providers like PayPal or Skrill. So, by providing a large number of options, you can ensure that the clients have no excuse for payment delays.
Creating a Robust Credit Policy
Most organisations have to offer credit to their clients to stay in business. However, extending too much credit, especially for new clients can have a disastrous impact on the cash flow which in turn, can affect business expansion and growth. Thus, it’s important that you create a watertight credit policy for your new and old clients. When you need to extend credit to a new client, be sure to ask for referrals and get a credit report from a credit rating agency to sanction a low-risk credit limit as per your discretion.
Investing in an Automated AR System
Investing in an automated accounts receivables software is one of the best things that you can do as a CFO to streamline the accounts receivable collections process. It will allow your accounts team to track invoices, automate payment reminders, check client history for calculating credit limits, and a lot more. The employees assigned to the collections process can also work closely with accounts due to the centralized nature of the cloud-based AR platforms.
There are many other things that you can do to improve AR collection, such as penalizing the clients for late payments, improving the dispute resolution process, etc. Only with the combination of all these measures, you can expect to improve the cash flow and attain financial stability.