A Guide to Accounts Receivable Best Practices
Accounting doesn’t have to be a constant challenge. Has your team struggled to stay on top of the accounts receivable process? If so, follow our accounts receivable best practices to stop wrestling with AR and keep payments predictable.
How To Streamline Accounting Processes
Follow this list of accounts receivable best practices to make AR easy:
Establish Clear Guidelines
Does your AR process change depending on the situation or customer? This should never be the case. Shifting practices can quickly lead to inefficient and inaccurate accounting records.
The key to good accounting is standardization. Every part of your process should look the same on a day-to-day basis, with the only thing changing being the account that’s handled. A systematic approach should cover credit terms, invoices, the process of sending invoices, and a method for handling income payments. While creating and enforcing formal guidelines for all of these processes may seem excessive, it’s the foundation of an efficient accounting system.
Create Standard Operating Procedures
Once you’ve developed a logical accounting process, you need to make sure it stays logical going forward. The best way to do this is with standard operating procedures (SOPs) that formally standardize accounts receivable workflows. Documenting your process step by step is critical for two reasons.
The first reason is that it gives your employees a point of reference in case they get stuck. While it may sound unlikely that your team would forget what to do, there are niche accounting processes that aren’t conducted as regularly. A wide gap in these processes is possible, which could lead to employees overlooking crucial steps. The last thing you want is employees stumbling through their work and making critical mistakes. SOPs guarantee that they’ll always know what to do next.
The second reason you need to establish SOPs is because it improves new hire onboarding. In-person training is a key part of onboarding, and keeping this process informal could lead to gaps in best practices. While informal workarounds are acceptable in some industries, there is no room for them in accounting. Rigorous SOPs are the best way to ensure new employees follow accounting procedures.
Have Issues With Your Accounting System?
Are you having issues with your AR systems? We developed a guide that covers common issues and how you can solve them:
Revamp Customer Communication
Customer communication is a critical part of accounts receivable best practices, especially with B2B accounts receivable. Your accounting department needs to maintain a congenial relationship with your clients. One of the best ways to keep customer relationships positive is by revamping your communication.
Payment is a touchy subject. It’s important to regularly remind clients about payments without being aggressive. Consider restructuring how your accounting team interacts with clients. You want to remind them often enough that they don’t forget, but not too often that you seem pushy. The right balance will depend on your industry.
Communicate with your clients to find the right solution. Collaborate with a long-time customer and ask them some of these questions:
- What kind of payment system would work best for you?
- Do you find reminders helpful or bothersome?
- Would you be interested in an early payment incentive?
- What’s the best way for us to reach you?
- How often is too often when it comes to us contacting you?
Handle customer communication on a case-by-case basis. We can’t overstate the importance of this accounts receivable best practice.
Incentivize Early Payments
An accounts receivable best practice that’s grown very popular in recent years is the incentive. Payment incentives keep your AR team consistently rolling instead of dealing with an influx of payments at the end of the month. A huge portion of late payments happen because a significant amount of time has passed since the original transaction. Incentives encourage the client to keep the payment in mind because they stand to financially gain from them. Money is a great motivator.
Transition to Electronic Invoicing
Electronic invoicing is another major accounts receivable best practice and what we consider to be the best way forward. There’s massive room for error in accounting systems that are dependent on paper. Not only does paper frequently get lost in transit, but it could easily get mixed up in an office. Electronic invoicing systems avoid this problem while adding their own unique advantages.
Electronic invoicing systems open the door to payment automation, which could be a huge step in streamlining your accounting system. Electronic invoicing can make customer payments automatic, which eliminates any missed payments caused by simple absentmindedness. Payment automation also translates to more consistent payments, which makes your accounting system more predictable. While predictability may be boring in some industries, it’s exactly what you want in accounting.
Start Your Collection Plan
Even with these best practices, there will always be clients who don’t pay. That’s why you need to have an actionable collection plan in place. The right collection plan will be effective without compromising your business’s reputation. If the prospect of handling accounts receivable collections on your own seems intimidating, consider partnering with a collections agency. An agency will have the tools and experience to get your AR back on track.
Turn to Rapid Collections for Accounts Receivable Best Practices
Are you tired of constantly marking down bad debt expenses or dealing with accounts that are months overdue? Partner with a collections agency. Collections agencies are made up of professionals whose primary focus is improving AR processes.
If you’re interested in collections but don’t know what agency to partner with, choose Rapid Collections. We’re a full-service provider, which means that you can lean on our support throughout the entire collections process, even if you need legal representation. Take back control of your AR and call us today.
