Let’s Talk Accounts Receivable Management!
Accounts receivable management may seem like an easy task. Really, the basic is that you just receive the money owed to you and putting it into an accounting program. Right? Well, yes, that is the basic idea. Yet, there’s more to it than that. You must be able to record payments. You must be able to get the information that you need to make sure that you are making sound business decisions. Those decisions include making sure that you’re getting a profit and making sure that you’re engaging in risky extensions of credit. It is incredibly important that you look at all of the elements involved in accounts receivable management. In this blog post, we are going to look at a few of the other parts involved in accounts receivable management.
If your business extends credit to other companies, it is imperative that you understand the risk that you’re taking. Clients A.R.M. certainly advocates providing lines of credit. It’s good for the economy and it’s good for your business. However, we also believe that you should understand the credit process and know how to set appropriate credit limits. You can read about credit controls here in one of our most popular posts.
Recognizing Clients With Financial Problems
It happens…and sometimes your clients will be upfront about it and there will be other clients who won’t say anything. This is another large component of your accounts receivable management process. You need to have a plan to deal with this situation. You can read some of our tips on how to recognize warning signs about financial problems. You can also learn more about how past due accounts will kill your business.
You have two options when it comes to dealing with clients with financial problems. You can move forward in the accounts receivable management cycle and begin the collections process or you can help your clients by giving them an option to pay you in full. This enables them to get the services from you that they need and eliminates the risk of delinquent accounts.
Learn What You Need to Know About Debt Recovery Agencies
There will come a point in your business that your AR management will need to move on to collections. This will mean that you will either perform the collections on your own (which can eat up a lot of your time) or you can look at debt recovery agencies. Debt recover agencies aren’t as expensive as you might think. They can actually save you money and time. However, not all debt recovery agencies are the same. It’s important that you know a few things about the agencies that you’re considering. You should research the following:
- Is the debt recovery agency reputable? Don’t just take their words for it, either. Check with others. If they say that they’re accredited or licensed by a certain agency, make the calls to find out if it’s true. If it is true, make sure that they are in good standing.
- Are there any complaints filed with the FTC or any consumer protection agency? Don’t forget to check with your state’s Attorney General or with the Attorney General in any state where you do business. If there are, follow up and find out what happened to those complaints.
- Know what you’re signing up to receive. You should know exactly what you’re getting. For instance, will you be receiving first party collections or third party collections? You should also make sure that you understand the payments. How much will you actually receive on what they are able to collect?
- What are their policies and procedures for collections? It’s important that the debt recovery agency that you work with doesn’t make your company look bad in the eyes of your clients.
As you can see, there is more to consider to AR management than just taking payments. You’ve got a lot to consider:
- Credit lines for clients
- Recognizing when a client may have financial problems
- How to handle delinquent accounts and
- Choosing a debt recovery agency
Questions? No problem. Clients A.R.M. has more than thirty years of accounts receivable management experience. We are providing a free review process of accounts receivable management processes. If you’re ready to get expert advice on your AR processes, we stand ready to help!