Addressing the most common accounts receivable challenges plays an important role in improving cash inflows for any business. Here are examples of issues business face when managing accounts receivables:
- Poor record keeping. Keeping track of how much customers owe, payment due dates, customer disputes, and other A/R-related information is vital to proper A/R management. Manual tracking can cause discrepancies and increase opportunities for error or fraud.
- Executing an effective credit policy. Before extending trade credit to customers, you need to do a credit check to make sure they can pay you back. Without a reliable way to determine the creditworthiness of your customers, you are more likely to run into problems when it’s time to collect the amounts due.
- Collections. When customers fall behind in payment, sellers spend time and resources trying to collect payments. Late payments result in financing challenges like reduced cash flow.
- Lack of communication with customers. Your business needs to remind customers when to make payments and send follow-ups about late payments to improve collection rates.
Most challenges in A/R stem from a manual and labor-intensive process. You can improve collections and cash flows by taking advantage of trade credit and A/R automation solutions.