Exploring Ways to Reduce Accounts Receivable and Increase Cash Flow

Any organization strives for the improvement of the accounts receivable management since it affects the company’s functions such as marketing and purchasing. For the working professional who wants to increase cash inflow and reduce the time and money being spent weekly on accounts receivable, the following options may be useful in reducing ‘AR’. Do not allow the build up of outstanding accounts to be a counterproductive to all the effort you put in your work. When your accounts receivable are efficient, you will be able to spend more time in business development, customer satisfaction, and innovation. 

Everyone expects to be paid for work done, and it is not a waste to spend time and money in order to make your process better. Here are some ways that you can take to minimize on the outstanding accounts receivable and be in a position to reinvest on the business: 

Here are some suggestions that you could implement to help reduce accounts receivable and sort out the cash flow issues in your business.

Upfront Fees Implementation

It is a common practice for some organizations to ask their clients to make a down payment before providing the services. While previously many firms used to adopt the system of billing by hours, the current trend shows that flat fee or value based billing is now preferred by many businesses as it is more advantageous for the business as well as the client. 

Some companies may ask for a fee to review a case for service but on the other hand, there are companies that will offer a free consultation but will need the client to make payment before continuing with the service. Being open regarding your prices as well as the mode of payment that you expect from your clients is establishing a good relationship with them. These areas of reliability stimulate customers to come back, recommend others and offer good accounts receivable. 

While setting your initial charges, note that some clients will not be willing to part with an amount before receiving a service. These concerns can be easily addressed if all fees are explained and the client and the attorney go through all the fees; the client should not be shocked to find a high bill waiting for him/her.

Structure Payment Plans

Once you’ve been paid a fee for the work, get in touch with your clients to work out how the rest of the charges will be covered. After this, your client can enroll in credit card authorization or complete an ACH form after agreeing on the payment plan. This helps avoid delayed payments and payment shortfalls, thus assuring a business that they will receive the due amount. In any case, there are actions one can take towards the management of accounts receivable that will be beneficial in the long run. 

Make sure that any payment method you adopt is easy and as mechanized as you can make it. Do not ignore the fact that more than one communication style may be used. For example, eliminate the use of paper invoices and instead send invoices through the email, and also provide different electronic means of making payment. Communication through the diverse channels will assist in helping the clients recall their payment obligations. 

Some professionals may find it useful to use management software that provides all the tools for a particular case in one place, for example, Canopy, which enables clients to make payments through their personal accounts, thus, providing them with the necessary convenience. Also, set periodic touch-point meetings to update the clients on their account balances, any other balance that is pending in their account and the available means to clear the balance. Canopy can also automatically send payment request after certain time that you set, making the work of accounts receivable better.

It may be beneficial to use software that encompasses accounting practice management such as Xero through which clients can make payments through their accounts, which will also be more easy for them.

Adhere to Payment Deadlines

Despite this, it is always important to ensure that all payments are made within the agreed time with the particular clients. Whether it is about charging fees in advance or doing billing and collections of outstanding amounts or even preparing accurate invoices, it is observed that a streamlined internal accounts receivable process is beneficial while dealing with clients regarding payments. 

Failure to make payments as and when due can cause a lot of problems for your business. Giving clients leeway on payments also does not help them. Another way of ensuring that payments are made earlier is by changing the due dates for the difficult clients to earlier ones. If a client often abuses your flexible working policy, then you can assign them an earlier time to pay for services. Reduce the payment period within a period that is compatible with the firm’s cash flow processing and management. 

If clients are behind with their payments, then e-billing may have to be suspended for a while and personal calls made. As much as people have been presented with more advanced ways of billing online, there are times that a simple call is more appropriate. If a client is constantly avoiding replying to emails or avoiding invoices, then a call should be made to the client to discuss why they are not paying and how they can be aided. 

At this stage you may be forced to have to hearth the relationship if all the other options have been exhausted. Seeking legal action in an effort to recover unpaid amounts may be required. If clients are continuously avoiding or delaying their payments, they should be let go as your business does not need them. If a client remains in the position where they are not paying on a regular basis, then one should probably think twice whether it is advantageous to continue the cooperation.

Get started right away to enjoy the advantages

If improving your business’s accounts receivable processes appear daunting, then it is helpful to know that you do not necessarily have to drastically alter, or revamp everything all at once. However, if positive changes are introduced and followed as early as possible, the positive changes in the amount of cash flow will be detected as soon as possible. If you like to make fast changes or prefer to make changes gradually, it is high time you fine-tune your accounts receivable process.

If you are planning to redesign your accounts receivable, do not make it hard for yourself to redesign it from scratch. Our expert team at FastLane Group is ready to assist you in any way you need on accounting matters. Contact us now to find out more!