Understanding Business Accounts Receivable for Small Businesses
Business accounts receivable is an important accounting term to understand if you are going to have a successful and profitable business. We believe it’s so important that we made it a part of our company name—American Receivable. Simply put, business accounts receivable are the monies customers owe to a business for products and/or services provided. The key term is “owe”. Business accounts receivable are an asset to your company, but they don’t count as actual cash until the invoice is verifiably paid. Some companies fail because they have a lot of accounts receivable on record, but they don’t follow up well enough on actually getting invoices paid and money in the bank quickly.
Have a Strong, Reliable System for Business Accounts Receivable
Without cash flow and money in an account, a business can’t sustain itself. Uncollected payments tie up money that can be used for growth, accounts payable, new orders, etc. Therefore, it is essential that a business has a solid system in place for invoicing, monitoring and collecting on accounts receivable in a timely manner. You are not in the business of giving goods and services for free, so allocating time and resources towards administrating your accounts receivable is good business practice.
To Give Credit or Not to Give Credit?
In retail, transactions are paid for at the time of purchase. However, in many business to business transactions, there are often terms for payment. This is the same as giving your clients credit, as they are receiving goods and services before paying for them. You may require a credit application to check on the prospective client’s payment history before allowing a longer term for their invoices. For example, your company may require payment in only 10 days after the date of the invoice before considering the payment late. For some companies, 30-day terms are the standard, especially when the client has a clean payment history. Whatever you choose, it is important to follow up with clients delinquent on their payment. If a client is consistently late, it may be worth requiring a deposit or shortening the payment terms for future transactions.
Be Diligent with Business Accounts Receivable
There is really no excuse for not being diligent about your business accounts receivable. Thanks to popular computer accounting software, producing business account receivables reports, and keeping track of aging accounts is simple. You just need to make sure to schedule it and generate the needed reports so that you can contact the delinquent clients and remind them that payment is overdue. The longer you let nonpayment slide, the less likely you are to collect on it, and so early intervention can prevent later aggravation.
Still Not Getting Paid?
What do you do when a client doesn’t pay and your company needs the cash? First of all, continue to reach out to the client and try to collect on the delinquent account. Another option is to take legal action, but this can be expensive—sometimes more than the amount you are owed. You can also consider factoring. American Receivable, the go-to source for factoring in Texas and throughout the nation, can help improve your business accounts receivable and help you make your business a success!
Here are some final tips to manage your business accounts receivable:
• Communicate with your clients about their invoice and outstanding balances. This includes making sure you have updated, accurate contact information
• Maintain diligence by having a detailed and scheduled procedure in place for invoicing, monitoring, and collecting payments
• Follow up on sent invoices in a timely manner
• Develop a regular schedule of follow-ups and how the communication will be sent
• Keep accurate records and documentation
Does your business accounts receivable need a boost? Are you thinking about factoring for your company help you get the cash your business needs? With offices in Dallas and Austin, American Receivable is ranked No. 1 nationally among small-business factoring companies. Since 1979, we have provided small businesses with the financial resources and business accounts receivable management strategies they need to grow, increase inventory, make payroll on time, and effectively compete in the marketplace. We can provide funding within as little as 24 hours in some cases. Call us for a FREE quote today at 1-800-297-6652, or complete this quick quote form.
By Jack Stieber – President – American Receivable