Cash flow management is important for long term survival of business. Almost every 3 out of 5 businesses suffer from cash flow problems which often leads to shutting down. Businessmen do not generally understand this. They are more concerned about increasing their business than managing their accounts. To survive the cut throat competition businesses have to extend credit to other businesses in order to keep customers from going away. This often hinders proper cash flow and parks money elsewhere. Due to extensive credit system it often happens that sundry debtors convert to bad and doubtful debts. Here are some effective strategies to manage your accounts receivable in a better manner.
Going electronic is an effective way to manage accounts receivables. Businesses can use accounting softwares to enter and generate invoices. Such software’s also allow billers to enter the credit period, say 60 or 90 days. So whenever the credit period approaches nearer, the software’s remind you of the bills about to become mature.
Formulate strict credit policies
Bills receivable are tricky to manage as people do not generally focus on them. In order to keep the business terms cordial businessmen do not remind their customers even after the bills become overdue. Formulating a strict bills receivable policy not only improves cash flow but also lessens chances of debts becoming bad and doubtful.
Offer extra discount
The best way to manage avoid getting into credit is to offer an extra cash discount if the buyer pays upfront. Cash discounts are lucrative and assist in proper cash flow. Cash discounts also avoid parking of money and there are less chances of losses.
Reduce credit period
Another way to ensure proper adequate accounts receivable management is reduction of credit limit of your creditors and debtors. This will ensure smoother fund flow. Reducing credit period can affect business but its nevertheless an effective option.
Hire a professional accountant
If you are struggling with management of your account receivables then hire a professional accountant or accounting firm to manage them. Professional accountants understand the importance of cash flow and will ensure that your accounts are properly maintained. They will take care of the maturity of bills and also keep you updated regarding their status.
Design an effective collection process
The only way to reduce accumulation of accounts receivable balance is to ensure that the collection is done on time. Constantly remind the debtors to pay on time. Send in a collection agent to personally oversee the payment. The agent will not only collect the amount on time but will also get you fresh orders. Employing an agent to oversee the collection will improve cash flow.
Adopt multiple payment systems
With increasing technological changes businesses do not have to depend particularly upon cash or payment by cheques. You can make payments using net banking, debit or credit cards, e-wallets etc. Having multiple payment channels ensures faster payments and avoids procrastination.
When we extend credit to our debtors it is our responsibility to maintain proper bills receivable accounts. The above mentioned strategies will assist in adequate cash flow management.