Money is the lifeline of any business. Business owners should monitor the payroll and daily workings of the company. An accountant should be scrutinizing and looking for ways for accounts receivables to be paid. The following are some tips on making sure that accounts receivables become actual cash in due time.
Money is the lifeline of any business. Business owners should monitor the payroll and daily workings of the company. It is imperative that an accountant should be scrutinizing and looking for ways for accounts receivables to be paid. Here are some tips on making sure that accounts receivables become actual cash in due time.
Having an accounts receivable software on hand is a must. (See last paragraph below.) Select a tool from the software that lets you do a simple reporting (it should be termed as Aging Report) of accounts receivables. This implement should be capable of reporting cash outstanding in intervals of 30 days from the day the sale was made or the day the service was given. Make sure that this report can be exported into Microsoft Excel to make it very useful.
Combine accounts receivable into related groupings. Clients who are single entities have a different behavior from clients that are whole companies. Large corporations usually pay longer because the decision has to go through a lot of entities. Commercial clients have different payment schedules than government clients. That is because there is a lot of red tape in government transactions. So, what the accountant does is to put clients with the same payment behaviors in one group and so on. The reason for this is the accounts receivable manager can formulate a stratagem for reducing the accounts receivable for each group.
It is advisable that the accounts receivables that have been there for the longest time and the accounts receivables that are very large should be dealt with first. These are the accounts receivables with the loss at the highest possible risk.
Front line managers should be contracted to build up methods that minimize the days sales outstanding or DSO on the basis of results with particular sellers. Probably the present policy calls for 3 to 4 weeks to go by before information on the client paying progresses from the Front Line Manager up to the Accounts Receivable Manager. However, if you are dealing with this information promptly that could lessen the time by 3-4 wks.
Sellers should know about the issues concerning collection. From time to time, the sellers do not know the issues underlying accounts payables. At times, only a clear communication regarding the state of things is all that is necessary to translate accounts receivable into the cash payment that is being sought after.
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