5 Mistakes Businesses Make When Managing Accounts Receivables

Managing accounts receivables is a tough task, but it is one that should be done consistently and effectively. When you make mistakes, you could affect your company’s financial standing and even the relationships you have with your customers. This article highlights the key accounts receivable mistakes businesses make and how you can avoid them.

Not Checking Credit Worthiness

This is the first key mistake that businesses, especially the new ones, make. For most new entrepreneurs, the goal is to create new accounts fast. While this is a good business goal, you should do it with a lot of caution. Before you offer someone goods or services on credit, check if they have a reputation for making payments on time and whether they have the means to pay. Have a clear credit policy for your business and ensure all the employees handling customers are aware of the details of the policy.

No Regular Preview of Accounts

Accounts should be reviewed regularly so that you always have a clear picture of what is almost due and what is overdue. When you check the accounts regularly, you can send out reminders to your customers on time. For those that are almost due, a polite reminder can increase your chances of getting paid on time. For those that are overdue, a reminder shows your customers that you are serious about your money.

For those who are almost due, a good reminder can be a simple email. However, for the overdue accounts, you may have to call and talk to the person in charge of making the payments.

Limited Payment Methods

A cheque is not the ideal payment method for all customers. Therefore, if you only accept cheques, you increase your chances of getting paid late or even losing some customers. A customer can shift if your payment option is not ideal for them. Therefore, look into digital payments as well. However, as you implement new payment modes, don’t forget to take the necessary precautions to avoid getting scammed by fraudsters.

Late and Incorrect Invoices

What measures do you have in place to ensure the client receives the right bill on time? Do you have any policies regarding how and when invoices should be sent? Is the client information on your systems correct? Late invoices and incorrect information on the invoice can irritate clients and delay payments.

No Receivables Management System

The best receivables management system can keep things running smoothly and efficiently. A good receivables management system allows you to have all your accounts in one centralized location. This can make it easier for you to do analysis and it also reduces conflicts with customers. A good system can also maximize efficiency, reduce your risks of not getting paid, and reduce unauthorized discounts by staff.

Conclusion

If you are not an expert when it comes to handling accounts receivable, you can consider hiring someone to handle the tasks for you. New and small business owners can do it all by themselves, but as the business grows, it is wise to seek help. By hiring a qualified and experienced person for the task, the process will be handled more effectively and you will have enough time to focus on other business processes.