If you’re a business owner, then you already know how important it is (and how difficult it can sometimes be) to get paid by your clients and by other businesses in a timely manner. This is such a serious problem for modern-day businesses that President Obama has publicly urged larger companies to pay the smaller vendors they owe money to and has even proposed a “Supplier Pay” initiative to increase the likelihood of this happening.
Whether you have high hopes for the initiative or don’t think it will end up doing much good, the fact still remains that it’s up to you, at the end of the day, to properly manage your accounts receivable, i.e. the accounts for which you have earned revenue but haven’t yet collected it.
A lot of people think they can just act like they already have the earned money, which doesn’t work so well and could lead to overdrafts and other problems. The thing to remember is that there is a big difference between managing money you actually have and managing accounts receivable, and it’s very important you understand how to properly and effectively manage those accounts that aren’t yet paid up. To help you with that, we’ve provided a few simple tips that, if practiced, will lead to better management of your accounts receivables.
Tip #1: Be Careful About Extending Credit
These days, many consumers feel like credit is a right, rather than a privilege. Don’t perpetuate this feeling of entitlement! Be careful about who you extend credit to by exacting background and credit checks and the like. Even if you’re careful, you’ll still have some people who don’t pay up, but you’ll weed out a lot of non-paying/delinquent clients if you’re choosy about who you give credit to.
Tip #2: Have Shorter AP Days and Longer AR Days
Another good strategy is to always make your accounts receivable days- i.e. the number of days it takes you to receive payment- less than your accounts payable days- the days when you have to pay money out of the business pocket. This way, you’ll be able to collect money more quickly than you owe it, always allowing you to stay in the black.
Tip #3: Hire a Great CPA
Finally, make sure you hire a skilled accountant, one who is very familiar with business accounting and who can help you with all of your financial questions and concerns. Once you do have a good accountant, use him or her to the fullest! Have your accountant help you with any and all financial matters, and whenever you don’t understand anything or have a question, go to your accountant for help and expert advice.
If you can follow these simple tips, you should have a much easier time managing your accounts receivable, which will bring many benefits your way! #ManageAccountsReceivables #Kinum