The Art Of Accounts Receivable Collection
ACCOUNTS RECEIVABLE COLLECTION PROCESS FLOW CHART
Running business is serious responsibility and managing the accounts receivable collection process is critical component for success. robust order to cash software solution offers wide range of functionality, from in-depth data analysis and reporting to specialized collections processes all of which can vastly improve accounts receivable collection and minimize risk and stress.
At its core, accounts receivable (AR) collection is the process of collecting payments from customers as soon as they are due, minimizing the impact of lost revenue and expense due to bad debt or delays in receipt of payments. This is achieved by utilizing an efficient and organized approach that accurately tracks payments, making sure invoices are sent on time, maintains communication with the customer and requests payments appropriately.
While an order to cash software solution can be beneficial in automating the AR collection process and ensuring accurate accounts, there is still significant value to having and understanding the fundamentals of an end-to-end AR collection process. The following provides step-by-step guide to understanding accounts receivable process flow chart and how to successfully manage it from start to finish.
Step 1: Create 3-Way Invoilce
The first step in the AR collection process is to generate three-way invoice for the customer. This consists of an invoice from the vendor, an acknowledgement from the customer and detailed document from the finance department, which includes customer and vendor payment terms. This document should be sent to the customer for confirmation.
Step 2: Follow-Up for Payments
Once the three-way invoice has been sent to the customer and payment terms have been agreed upon, the next step is to follow up with the customer to ensure that payments are being made as outlined in the payment schedule. It is important to send regular reminders to the customer, as well as any necessary documents to keep them on track.
Step 3: Maintain Communication
Once payment terms have been established and payments have been sent, it is important to continue to maintain communication with the customer. This can include follow-up texts, emails or phone calls that remind them of upcoming payments, offer customer service assistance, or provide any other customer-focused support that is needed.
Step 4: Mitigate Delinquencies
If payments fall behind, it is important to take corrective measures in order to mitigate delinquencies. This includes making note of when payments were late, searching for reasons why payments were late, and working with the customer to resolve any issues.
Step 5: Utilize Automation
Although manual processes are important to the AR collection process, automation is particularly beneficial in streamlining the process, ensuring accuracy, and minimizing the amount of time and energy spent on manual tasks. Automation tools also enable you to easily track payments, send reminders, and access reporting that provides insights into customer payment trends.
Step 6: Identify Causes of Delinquencies
Once payments have become delinquent, it is important to identify and address the causes of delinquencies. This can include anything from customer information inaccuracies to invalid payment terms. By identifying and addressing the root cause of delinquencies, you can ensure that payments are made in timely manner and minimize risk.
Step 7: Retain Control
It is important to retain control of the accounts receivable process, as it can quickly spiral out of control if not managed regularly. This requires both providing regular customer support when needed and staying up-to-date with industry regulations and best practices. By remaining in control of the process, you can keep your customer relationships in good standing and minimize the potential for missed payments.
Conclusion
Accounts receivable collections are key component in the success of any business. An efficient and organized approach is required to ensure payments are received as quickly as possible and minimize the impact of bad debt or delayed reimbursements. With the right order to cash software solution and clear understanding of accounts receivable process flow chart, businesses can streamline their AR collection processes and minimize risk.
