Accounts receivable refers to the money the company is owed from its customers or the outstanding invoices a company has yet to receive payment from its clients. However, collecting the debts from customers can always be a difficult task. The longer an invoice remain unpaid, the lower the likelihood you are to receive payment. Thus, below are some recommendations in effectively managing your accounts receivable.
1. Reduce Days Sales Outstanding
One of the key metrics to track for managing accounts receivable is Days Sales Outstanding (DSO). DSO represents the average number of days you take to collect the money owed to you after a sale has been made. A low DSO is essential to ensure sufficient cash is available for companies to reinvest in marketing, sales and business operations as well as to increase business’s cash flow, allowing for funds to be allocated to growing.
According to a study of an industry analysts Paysteam Advisor asked financial professionals to rank their most important challenges when it comes to their receivables operations , 87% reported that reducing DSO was their most important challenge. While reducing DSO may be the most important challenge, there are quite a few things that organizations can do to address it:
- Electronic Invoicing
One simple method to reduce DSO is converting paper to email with electronic invoicing/billing software, which also reduces labor and paper costs. Businesses can often reduce the collection cycle by 2-6 days after implementing electronic invoicing/billing software.
- Send Reminder Emails
Another strategy is sending triggered reminder emails. In most circumstance, clients do not intend to avoid paying an invoice, they have just simply forgotten. Therefore, reminder emails can greatly assist to tackle this challenge. For example, user can directly email invoice and reminder message to client through Netiquette Inventory & Billing Software as a one stop solution to reduce DSO.
2. Improve Your Customer Credit Management
We’ve all had customers with a history of paying on time and those customers that pay late. The key to maintain a healthy cash flow and low DSO is to isolate the late payers by applying different credit limits and collection strategies such as penalize customers that do not pay on time with a late fees to their accounts in order to reduce risk.
Accounts receivable software allows you to apply these terms and perform interest calculations as well as to monitor payment trends with aging reports to reduce overall credit risk. With Netiquette Accounting Software, you don’t need to pull multiple spreadsheets to figure out which payments are overdue and how much interest you should charge.
Example of Account Receivable Software
Netiquette Accounting module does more than just track receivables entries, it also provides you with an ongoing and updated customer database. The master customer profile list stores individual customer records with contact info, addresses, terms, and other customer data. Each time you post a receivables entry it is associated back to a customer and you can easily identify customers in good standing or with late payments by using filtering capabilities. With a variety of financial reports able to be generated in Netiquette Accounting Software you’ll be able to quickly update yourself with the information you need to make key business decisions.
Netiquette Accounting Software improves cash flow by letting user to organize, categorize, and report the data so that tracking DSO, aging invoices and high-risk clients is automatic. With a Netiquette system, you can be proactive in your collections process and improve cash flow and will no longer need to headache about:
- What invoices are late?
- Who owes you money?
- How much money is owed?
This is because Netiquette Accounting Software answers these and other critical questions about the income you receive from your clients.
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