Wednesday, 1 March 2017

5 Tips for Managing Accounts Receivables for Small Business

Accounts Receivable is an unavoidable aspect of business as invoices are sent out periodically for payment of work completed. Managing your accounts receivable process can be difficult and time consuming work. Here are a few tips:-

  • Maintain correct customer records
  • Clearly indicate payment terms
  • Offer settlement discounts or instalment plans
  • Use an aged trial balance
  • Outsource

Know your customer

The number one tip is to know your customer. Having the correct records and knowing the correct legal entity of your customer is imperative. A completed credit application will mean the debtor has provided you with these details and at least an ABN that can assist you in determining whether or not it is a Company, sole trader, partnership or individual you are dealing with. The trade references provided on this credit application will also allow you to check if they are likely to be a slow payer and or if they have any major non-payment issues which may assist you to avoid writing bad debt.

Payment terms

If you invoice and accept payment for goods and services after they’ve been provided, you should establish your credit terms and make sure your customer understand and acknowledge your terms and conditions for payment.

Settlement or payment proposals

Should you have a customer who is unable to pay by the due date and you know they are having difficulty a payment plan that is agreeable to both parties may be the best option. Whilst it may take 3 months to get full payment it is better than not being paid at all. Alternatively, a settlement discount for those whom pay before the due date will increase cash flow. This is of course only if your profit margin allows for a settlement discount option.

Aged Trial Balance

It is important to know whom, how much and from what date you are owed monies. A trial balance will list all your outstanding debtors, how much they owe and how far outside your terms of payment they are. This will assist you in determining whether or not they need a simple reminder or whether or not you need to decide whether to continue to supply or place the account on hold until the arrears are brought up to date.


If you are having huge issues with late payments or delinquent accounts you might need to outsource. Using collection agencies can be daunting and rightfully so. You can find a company that will get you payment and treat both you and your customers professionally. It’s all about asking the right questions. If you find yourself in the position of needing to send accounts to collections, do your due diligence and you’ll find a partner who will make their first priority to get you paid, while letting you focus on the other things that are important for your business. Pro-Collect Pty Ltd is a specialist Debt Collection agency that offers Accounts Receivables Management or your ledger.

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