Congratulations on taking the first step to review and improve your accounts receivable function.
Sadly, this short guideline won’t provide detailed or client specific advice BUT we have distilled the essence of world class Accounts Receivable processes in three key sections to get you started with improving your own AR processes.
What are your written terms of trade?
Are they contemporary?
Were they designed for your specific business? Who do you (or don’t you) give credit to?
How long will that credit period be?
What are the processes used to apply your policies? E.g. Credit – which credit agency do you use (if any).
What credit application processes exist? What are the planned escalation processes when a client doesn’t pay?
Who is responsible for Accounts Receivable results?
Do they have the right training, skills, attitude and tools to do the job well? We’ve seen fabulous policy and process documents that have never been used in practice, because of a people issue.
Credit management needs to be a priority for somebody, or a team. Receipts need to be reconciled, slow payers escalated, and cash flows adjusted on a regular basis.
If you’re not driving the priority – your debtors will be, allowing them to pay you when they feel like it, rather than when you agreed.
Having the ability to offer multiple payment options should be a part of your policy.
You should also promote payment options and methods that increase the predictability of your cash flow.
Consider using “smart debits”, which unlike regular direct debits, will give you more flexibility and control but also means that your clients will never have a debit dishonour.
Want something more specific to your actual circumstances – Book a Strategy Call here.