Businesses around the world have learned plenty of things in the past few months. While inching forward, companies strive to implement different strategies to stay above the curb and meet evolving demand.
As we navigate through the ongoing pandemic, adequate accounts receivable management becomes hugely vital, particularly for improving the company’s cash flow management. This blog would unveil some handy techniques that will let you improve account receivables during the crisis.
As a business owner, you must concentrate on collections while tackling other vital areas that directly impact the company’s growth. Optimized collections not only improve the cash visibility but also strengthen the financial standing of the company.
Actionable Strategies to Improve Account Receivables Process Amid Financial Crunch
Following are the proven strategies that help businesses to grow even in the tough times. Make sure to implement them strategically to improve account receivables function.
Understand your Target Consumers
During the financial crunch, you must know the consumers’ current status; some of them would be able to make prompt payments while others may struggle to do the same. Following up on consumers also helps check total AR. Offer end-to-end support to your consumers in difficult times would definitely the improve account receivables of the company.
Keep Your Customers Informed
Nurturing an existing customer base is the best thing you can do to improve account receivables. Do not make a mistake to undervalue the current clients while targeting the new ones with lucrative offers. Keep everything transparent with your prospects as much as possible, whether it’s a matter of delivery issues or launching a new line of products.
Your existing consumers add to your revenue; therefore, strive to keep them delighted, even at expenses. The new prospects take time to convert into a potential buyer, so valuing old customers is something you can’t negotiate at all.
You also require being more versatile in accepting payments if you wish to increase the chance of recurring incomes. Taking care of the existing customer is more productive and less costly than identifying new customers, particularly in the economically comprised situation.
Management of Account Receivable in your Company
Managing cash flow, particularly AR, is extremely important amidst any sort of crisis. For this, you need to ensure that your financing options stay intact. The preceding fiscal sources may have perished entirely under the influence of the financial crisis. Secondly, when the economy is thriving rapidly, many firms become relaxed with their cash flow management, whereas, during the pandemic, you should accelerate your receivables.
During tough times it becomes important to determine how your receivables are being managed; conduct an in-depth check of collections. Make sure your employees managing Account receivable are collecting the legitimate amount for goods & services & following up on late payers.
Offer Flexible Payment Plans
It is imperative to cross-check the customer payment terms, particularly amid the crisis, to induce them for timely payment. This becomes important if you have consumers who typically have due payment.
To improve the AR process, make sure to follow up with the consumers regularly. This is to consider their financial status, whether they seek alteration in the payment plan or they are okay paying the actual amount by the due date.
Negotiating & rendering versatile payment plans could improve account receivables for the company. For example, if your customers intend to make half or partial payment, consider permitting based on their previous track record. This not only strengthens the relationship with them but also ensures business growth. Failing to impart transparency within the payment system has forced many companies to opt for Accounts Receivable Services from third-party firms.
Permit Payment Extension
Based on the intensity of the crisis, many customers might struggle to make timely payments because of their dried-out income sources. If you have a long list of payment defaulters who cannot make a payment, you may consider elongating the existing payment terms.
An extended payment plan not only helps in retaining the customers but also increases the trustworthiness of the organization. Overly extended payment terms might be translated into compromised cash flow for the company; thus, set it accordingly, especially after evaluating the customer’s situation on a case by case basis.
Stop imposing Late Payment Fees
During a crisis, when clients strive to adjust to the conditions and to explore different income streams to stay afloat, you may avoid adding up late payment fees as a courtesy. All you require to steak with such a strategy until the dust settle down and the customer base find their way out of this challenging situation. Supporting customers during hardship is a worthwhile and, more importantly, growth-oriented approach.
Offer Discount on Advance Payments
Staying stagnant with your payment terms won’t do any good for your business, particularly during a crisis. Your customers will remain at the bay until and unless you do something that encourages them to make timely payments during the tough time.
Offering a discount on the advance payment will lit up your customer base, which would further improve account receivables of the company.
Provide Multiple Payment Options
Underpinning multiple payment options could be helpful in speeding up the collection process. With this, you can anticipate all customers to make timely payments with reduced delay.
You should deploy various payment options, including those that excel on the online channel, would enable the customers to make prompt payments.
Automate the Whole Process
Automating the AR process can impart resilience to the collection process by speeding up the essential protocols. With AI-powered programs, you can secure accurate customer records and avert potential downsides triggered by the mismanagement of billable hours.
It is advisable to have a qualified team in place to manage the software tools as this could result in higher accuracy in accounts receivable management. Your AR team can leverage an automation tool for generating AR records and data entry. With this, the accounting department can focus on following up on late payments.
Scrutinize Your AR Process Regularly
The compromised cash flow management seeks an in-depth analysis of AR and AR turnover without exception. This will give you clear insight into areas that are lacking and need prompt repairmen.
Focus on Accounts Payable as well
To keep your business a float & improve accounts receivable services, you must have clear information on all debits and credits. Consider using the latest tools to serve such a purpose as this would allow you to obtain accurate data about your finances. Keeping track of expenses and incomes will let you ensure seamless management of the overall financial activities.
Also, non-payment literally gives the hard times to the company, particularly in the state of the financial crisis. Paying higher interest or costly late payment fees is normal in such a situation. The only way out of this is to make timely payments to the vendors so that business productivity can remain intact as long as possible.
The COVID-19 pandemic has disrupted the world economy to its core, making life tougher for companies to effectively maintain their productivity and finances. As companies are forced to operate with a limited workforce, keeping cash reserves intact is becoming more vital than ever.
Businesses should opt for a sound strategy to strike the right balance between maintaining customer relationships and collecting money owed. The key here is to maintain complete transparency and positive communication with customers. The time has come for entrepreneurs and business owners to opt for the latest technologies as it can let them improve account receivables function of the company.
Read our article:Simple Techniques to Improve the Accounts Receivable Turnover