Liquidity is key to the smooth functioning of businesses; it helps with paying salaries, procuring raw materials, etc., in a timely manner, keeping the grand business machinery running. Basically, proper management of accounts receivable is among the most ways of ensuring the long-term survival of your business. It is common for businesses, especially small and medium ones, in India to face cash crunch because of delayed or mismanaged receivables. These often result in sour relationships and in some cases even loss of business. However, there are some really effective ways businesses can use to speed up their cash inflow and keep things smooth: certain processes combined with diligence. Let’s have a look at how you can improve the accounts receivable in your business.
Be Open to Multiple Payment Options
Not every entity your business deals with pays using the method of your preference. Keep it more open, provide the option of e-wallets, NEFT, RTGS, besides cash or cheque. You have to keep their preferences in mind to keep the accounts receivable position of your company strong.
Communicate and Follow-up
Communicate with the clients on multiple channels such as SMS, e-mail, e-messengers, phone, etc. Make sure bills are sent and reminders are communicated on all such channels. Also, have a very stringent follow-up mechanism. Studies show that the longer it takes a receivable to be collected the less likely it is that it will ever be collected. So the topmost priorities should be receivables that are already past due dates.
Offer Discounts on Early Payments
Say, it’s a 30-day credit period. You can offer discounts depending on how early the client pays (a 5% discount within 10 days, 2% discount between 11-20 days, et al.). If you are thinking that discounts will be a cost to company, relax. Such a small cost will be totally worth keeping your inward cash flows strong on a regular basis.
Hire People to Manage Accounts Receivable
Persons hired specifically to manage collections will be more likely in getting the job done. These people are trained specifically to handle receivables as well as clients, so their success ratio will be naturally more. As they know the tricks of this particular work, your company might as well consider hiring them to manage receivables.