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If you study a list of failed companies, you’ll readily notice that poor cash flow is one of the primary causes of business failures. And it automatically follows that accounts receivable is one of the central contributing factors to failed cash flow.
If you want to enhance your cash flow and build an efficient operation, you probably ought to improve your accounts receivable process.
The Challenge With Accounts Receivable
If you’ve been in business for any length of time, then you know just how painstaking and frustrating accounting can be … especially if you don’t have a background in accounting. In particular, accounts receivable — or the portion of your cash flow that’s yet to be received — can be a major source of problems.
“Accounts Receivable is sort of part of a no man’s land between inflow and outflow. It will be inflow, but isn’t yet. And since you made the outlay of the service or product, it’s a cash outflow. But it will be returned,” accountant David Clarke writes.
“Having Accounts Receivable is a positive thing for your business: it means you’re making sales which are an important first step towards business success. But the second step is just as important: collection.”
That’s typically the harder part of the accounts receivable process. How do you extend credit to clients, yet ensure that they pay quickly, efficiently, and in full? It’s an issue nearly every small business owner has to deal with, so it requires an intentional approach.
Four Ways to Improve and Streamline Accounts Receivable
If you study the accounts receivable processes of some of the best firms in your industry, you should perceive that… Read More
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