7 Tips for Receivables Management

7 Tips for Receivables Management

However, in general the following tips will help you master your skills in managing your receivables, have plenty of cash to make new investments and pay your vendors in time, following are the 7 tips for receivables management effectively: –

Record the Sales at the earliest

  • Invoices should be issued promptly after sales to avoid time or money loss.
  • Send an email of the invoice to your customer right away after entering in your accounting software.
  • Payments should be regularly monitored so that reminders for the balance can be sent at appropriate time.
  • On time recording of sales can also reduce or mitigate the risk of conflicts with the customers.

Avoid unclear, confusing invoicing

  • Invoices must reflect the actual services rendered or goods delivered.
  • Invoice must meet important criteria like:
  • Sender Name, Address and contact details
  • Date of invoice
  • Invoice Number
  • Net Price and VAT charged (as percentage and amount)
  • Invoice must also mentions the agreed terms and conditions clearly.

 Payment Policies must be informed and agreed

  • Deadlines for discounts offered on upfront payment must be clearly conveyed.
  • Customers having low credit worthiness should be asked to pay in advance.
  • Credit checks should be mandatory for all new customers.
  • Cash on delivery policy can be a better way to deal with slow-paying customers.

Do not hesitate to give “Reminder”

  • Giving a formal and friendly reminder for business payments is a good practice and essential to keep the outstanding payers, alert.
  • Specially important for new business and must not be neglected.
  • For future evidence it is recommended to give written reminders.

Maintain complete record of the customers:

  • It plays a foundation role in relation with the client.
  • Records must be completely and accurately prepared and stored.
  • Saves times in case of any event of a legal dispute.

Introduce Credit Risk Management Polices

  • Cash flow and payment practice of the customers must be considered to avoid critical payment delays or bad debts.
  • Routine delays should be recorded and must be considered before entering into future deals.
  • Information about credit worthiness of an existing or new customer can be obtained from credit rating agencies.
  • If bad debt is likely then payment on delivery is the safest option to opt.

Legal Action should be the last resort

  • Good Customer relation should be on the priority in business.
  • All possible efforts should be taken to find a mutually agreed solution.
  • Use of arbitrator or mediator can be of great support to avoid lengthy legal procedures.

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