If you are running a small business, increasing the turnover of your accounts receivables is one of the most important tasks. The sale of products or services cannot be counted in the revenue unless you receive the payment from your customers. If you efficiently manage your account receivables, then you can collect the payments from customers as soon as possible. It will ultimately affect the cash flow in your business. If you can maintain good cash flow, then you can easily get the long term success in your business. According to the experts, all business owners should invest in the accounts receivable solutions to accelerate the growth of the business.
The account receivable turnover can be described as the measure of the effectiveness of your business in transforming the account receivables into cash. This factor will help in determining the efficiency of extending the credit to your clients and collect money owed by using the ratio of the Accounts Receivable Turnover.
Here, in this article, we are going to discuss different ways to improve the ratio of accounts receivable turnover:
Create Strong Relationships with Customers
According to the thumb rule, the accounts receivable plays a vital role in building a good relationship with the customers. Usually, happy customers are ready to pay for good quality products or services. Whether you are running a small company or you are running a full-fledged enterprise, you should also form a good relationship with your customers. A friendly email or telephonic conversation can help you to create a big difference. If you want to have on-time payments, then you should good relationships with customers will be quite beneficial.
Send Right Invoices At Right Time
The accurate and detailed invoices should be sent to your customers at the right time. When your customers receive the invoices at the right time, then they will likely make payments before the deadline. It is very important to send the invoices as soon as possible. It is recommended to send the invoices to your customers immediately after selling the products or services. According to the survey, the companies that delay in sending the invoices get late payments. These companies usually face problems in maintaining cash flow. Therefore, it is a good idea to invest in the receivable solutions that can help in sending the invoices automatically.
Never assume that your customers will make payments at the right time. You just never wait for growing outstanding invoices because they can lead to a bad impact on your business.
Incorporate Payment Terms
You should set the account receivable in such a way that you can achieve your objectives. You should clear the payment terms and policies to your customers. These terms and policies should be clearly mentioned on the invoices. Use accounts receivable problems solutions software to create the invoices and send to your customers. Allow your customers only 30 days to make payments. Also, mention that you will charge late payment fees if the deadline would be crossed.
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Invest In Online Accounting Software
The cloud-based or online accounting software can help in making your entire accounts receivable process much efficient and simple. If you use cloud-based accounting software, then it will help you to access your financial record anywhere. Also, you can easily collaborate with your accounting team anytime and from anywhere. The online accounts receivable portal is available with a wide range of analytic tools that can help in maintaining the cash flow in your business.
Make Payment Convenient For Customers
You should allow your customers to make payments through different modes. You should provide different ways for your customers to make payments. It will decrease the barriers in payments and help you to collect the accounts receivables as soon as possible. If you provide convenience in the payments, then there is a high probability of collecting the payments at a faster rate. Also, you should allow your customers to make payments through traditional mode.
Never Pile Up Outstanding Invoices
You should never allow growing the pile of unpaid invoices. It will be a direct threat to your company. It is a direct indication that your business is at a big risk. The best way to manage the account receivables is to get the payments before the deadline. The accounting software can help you in managing the process and help in improving the cash position of your company.
Create a Simplified Billing Structure
Most business owners have reduced the issues related to the account receivables by adopting the transitioning to fix fee billing criteria. In this new technique, when you sign a new contract with your customer, then you should offer the same services or products at a similar price to your customers. It can help in reducing the panic and help you to get the clients that will stay with your business for a long time.