The Accounts Receivable Collection: An Introduction


For todays highly competitive corporate landscape, an efficient accounts receivable collection process is necessity. This is especially true when considering order to cash software, which allows businesses to effectively reconcile incoming payments and manage their debtors. To ensure proper success through the use of such software, it is important to understand the steps involved in successful accounts receivable collection process.

Before beginning the process of accounts receivable collection, it is essential that businesses have strong understanding of their current cash flow situation. This includes assessing the companies current assets and liabilities, as well as evaluating the current market position in order to make strategic decisions. This assessment will reveal emerging trends that can be leveraged in order to maximize the returns from collections.

Once the company has comprehensive understanding of their cash flow, it is time to create an accounts receivable collection plan. This typically involves identified the following steps:

1. Determining the Accounts Receivable: This step entails evaluating the accounts receivable and their relative impact on the business. It is essential that businesses properly identify the right customers, and assess their payment terms, average payment amounts, discount policies, and potential risks associated with their debt.

2. Setting Terms andCredit Policies: This includes the production of necessary documents, such as payment schedules and credit agreements, which should clearly indicate the payment terms. It is important to ensure that these policies accurately reflect the companies needs and expectations.

3. Credit Evaluation: The credit evaluation should be done prior to any sales transaction. This helps companies to determine the risk associated with customers prior to making any sales. This process should ensure that accounts receivable documents, such as sales invoices, are adequately filled out prior to invoicing.

4. Payment Evaluation: After sales transactions are completed, the companieshould assess the payments received from customers in order to identify slow payments or non-payments. This is instrumental in order to identify potential problems that need to be addressed.

5. Payment Reminders: Companies should make payment reminders priority when collecting on accounts receivable. This can be done through reports, emails, or other forms of communication. This helps to encourage timely payments and establish certain expectations with customers.

6. Successful Collection: Successfully collecting on outstanding debts requires constant communication between customers and the company. This includes keeping an open dialogue of any upcoming payments and meeting any requests that customers might have.

These steps should form the foundation of any accounts receivable collection process. When combined with the strengths of order to cash software, businesses can ensure proper continuity and accuracy in their accounts receivable collection process. This helps to provide added efficiency and peace of mind for executives in the finance department.