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A cash collection call can be intimidating to receive and make. If you give products or services on credit, you create accounts receivables (AR) and have likely had to collect an unpaid balance.
Cash collection is a vital part of managing the order-to-cash cycle. If your organization does not have a cash collection process, you will risk a backlog of unpaid invoices that may become uncollectible. Your business may then become insolvent if there is no steady cash flow.
To help you avoid further disruptions in your cash flow and business operations, we have put together this guide on how to set up an efficient cash collection process.
Understanding the Order-to-Cash Process
The order-to-cash process, also called the customer cycle or the AR cycle, is the journey a customer takes from the time they place an order with your company until they pay for their order. The order to cash process has five components:
Sales and Credit ApplicationOrder Placement and FulfillmentInvoicingCollectionsCash Applications
Before creating a collections process for billed invoices, ensure the first three parts of the order cycle are iron-clad. Ensure processes for sales applications are evaluated for proper credit worthiness, orders are entered correctly, and billing is produced with accurate charges.
The Cash Collection Process
If billing is accurate, a collections process will prevent invoices from becoming past due and collect money on invoices that have become past due. A collections process will address how customers are notified about balances due and will manage payments as they come in.
Analyze Accounts Receivable Aging
An accounts receivable aging is a report that shows the accounts that … Read More
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