Why is it important to have an organized accounts receivable process?

1. Efficient collection process

Collecting payments can be one of the most unpleasant parts of the accounts receivable process, but it is key to ensuring a company’s success. Customers can occasionally fail to pay on time, not because of a lack of funds, but because the company fails to charge them or doesn’t effectively send reminders for payment.

Leveraging a software that automatically reminds them of the deadline can help your AR team get ahead of this type of problem. When a payment is delayed, you should not take long to notify the customer and apply late charges. Not doing so could delay the payment further and hinder your cash flow.

One best practice is to track more closely those clients who have a tendency of sending delayed payments. This might reduce the risk of them continuously impacting your business.

2. Default risk control

A well-structured process allows you to collect data on non-compliance rates and therefore implement more assertive planning. This offers the best method of maintaining control over your company’s numbers and tendencies. The ideal scenario is that the non-compliance rate not go beyond 5% to be considered financially healthy.

Once you have this part of the process under control, you can encourage the clients with a history of paying on time to continue to do so by offering some benefits like discounts or preferred services. 

3. Healthy cash flow planning 

Once you have all the data about your accounts receivable and your non-compliance rate, you can measure what your monthly income should be.

By doing that, you’ll be able to define how much you can spend and invest. And when tracking your accounts receivable, you get to apply interest on delayed payments from previous months.

These are just a few benefits you can get by having an organized AR process. Our first tip is for you to take your data out of spreadsheets and put it into a standardized workflow processing tool where you can automate manual tasks, gain greater visibility into your accounts receivable and payable tasks and guarantee more accurate monthly projections.