Account receivable management is one of the keys to ensuring that your business’s financial health is sufficient to handle daily expenses. Unfortunately, not many business organizations know how to effectively manage accounts receivable and when they need to improve it.
Some of the common bad signs of accounts receivable are –
- If you have miles extended days sales outstanding cycle, it means that you are selling a lot on credit. When you have a long list of receivables due, you will likely spend most of your time clearing the debts rather than improving your sales.
- Credit is one of the core functions of business practices, so you should not eliminate it overnight. However, giving credit to new clients without a background check would be financial suicide. Thus, always run a deep background check before giving credit to the new clients.
- There’s no harm in selling goods on credit, but when you don’t have an adequate accounts receivable management system to recover back your money, it is a problem. You need to set up a department or appoint a person to manage all the due payment and who can send invoices on time.
- You need to fix the short collection period as much as possible. It is a gigantic warning sign when you start to give a long period to collect the debts. The reminder call to clear due should be sent out within 30 days, even earlier, but not later than that.
- One of the worst signs of bad accounts receivable management is when you aren’t using the latest technologies to manage it. Nowadays, a plethora of software is available to smoothen up your cash flow system, so if you aren’t using them, you are set to doom.
- Frequent reconciliation issues with customers also delay the recovery process. Credit notes, debit notes, TDS, GST related adjustments or errors in accounting consume time and efforts to reconcile your books with that of customer as customer outstanding will differ from yours.
If you are looking for a helping hand to improve your accounts receivable management, you can approach us at The VirtuVantage CFO, and our efficient team will instantly improve your financial health. For more details, contact on email- richa@thevirtuvantagecfo.com or can call on +91 90828-42215