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Accounts Receivable Process Improvement

By MarksNelson on March 4, 2015 in Articles, Consulting Services

Do you wish you could get paid for your services more quickly and with less effort?

It is often easier to make the sale than it is to actually collect the amount due from your customer. Today, successful firms understand that the collections process does not start when an account becomes past due.  There are several upstream processes that when aligned properly can significantly improve your ability to get paid more quickly and completely.  The connection between the people and systems that sell, bill and collect are not always optimized.

The first place to start is with the credit terms that you have established for your business.  Do they meet the needs of your customers while still providing an adequate flow of cash into your business?  How long does it take from the time you provide your product or service to your customer before the bill is cut and the funds are in your account?  Reducing the cycle time from delivery to invoicing to collection is key to ensuring the optimal level of liquidity within your business.

The process for determining when an invoice should be cut and then how that invoice flows through approvals and gets delivered adds time before the customer even sees the amount that is due.  Once the customer receives the invoice, they make choices about when to pay based on their schedule and what best suits their needs.  The options available to them to actually make payment is another variable that can determine how easy and convenient it is for the customer to respond in a timely manner. Considering all these factors and streamlining your invoicing and payment processes can make all the difference in how quickly you receive payment.

Statistics show that the longer an account remains unpaid, the lower the probability of collection.  There are key metrics that should be reviewed on a regular basis to see how the process is running and when action needs to be taken.  To help ensure you get paid as quickly as possible, your policies, procedures and systems need to be clear and consistent, yet be flexible for when circumstances require exceptions.   And, of course, the process should be as automated as possible to minimize the expense you incur on this function.

Reviewing your policies, processes and systems to see where the bottlenecks exist and how to eliminate them will help to improve productivity.   Improvement in your accounts receivable process will free up the cash that you have earned so you can reinvest in your future.


About the Author

MarksNelsonView all posts by MarksNelson
MarksNelson LLC works with clients to help safeguard and grow their businesses. Our ultimate goal is to help our clients to Move Forward. The firm provides Assurance, Accounting Services and Business Advisory, Business Valuation, Consulting, Cost Segregation, Employee Benefit Plan Audits, Litigation Support, Forensic Accounting, International Tax, State and Local Tax and Tax planning, advisory and compliance services. MarksNelson is a member of The Leading Edge Alliance, the second-largest international professional association of independently owned accounting and consulting firms, serving clients who need additional resources on a national or international level. MarksNelson has significant accounting and business advisory experience in the auto dealership, construction, insurance, manufacturing, distribution and real estate sectors. The firm was named among the 2014 Best Accounting Firms for Leadership Equity by the 2014 Accounting MOVE Project for its dedication to gender equity.