Accounting & Bookkeeping

Why account receivable management is necessary for businesses?

Accounts Receivable Management for a business

Importance of Accounts Receivable Management for a business

Why account receivable management is necessary for businesses

The simple motto of accounts receivable management is to ensure that the inflow of income is timely for running the business hassle-free. It’s important to ensure that the expenses do not get above the income, as it can lead to downward growth. Therefore, to implement the same, good credit control or an AR (Accounts Receivables) policy can come to the rescue.

How to set up a credit control/ AR policy?

The following are the points that a business must keep in mind to build a good credit control policy.

  • The requirement of payments:

How much payment, at what time and for what they would require, must be kept in mind.

  • A number of clients:

We should also take the number of clients into consideration.

  • Industry type:

This is also the main aspect when deciding an AR policy. There are some businesses where huge credit are required and some are just the opposite in nature.

  • Future plan:

A business must keep in mind its future goals like expansion by opening stores, etc. while building an AR policy.

Importance of credit control/ AR policy:

Impact on day-to-day business operations: Credit control decides the policy to receive payment from customers which is the main source of income for a business and to run its daily activities and expenses. By setting up a credit control policy, the inflow of income would be timelier and that will affect the daily business operations positively.

Better cash flow: A nicely crafted AR policy always improves the cash flow of a business. Generally, AR policy decides the time granted to a customer for credits, so a strict follow up on the same would make the cash flow regular.

Saves time and money: A good credit control policy saves time for business as the cash flow would be done through advance planning. Thus, you will not need to do multiple follow-ups to a client anymore, which would save a lot of time and money for a business.

The benefit of the evolution: With the changing time, the process of accounts receivable management has also been changed with advanced technology and equipment. There is much software that can track the credit policy and customers’ payments automatically and saves time for a business.

Better B2B relations: With an AR policy, a business decides the time period granted to its clients based on their credit reports. With that, the business can grant some more time to trustworthy customers and cut down period for risky ones. That will also improve a business’s financial strength as well as build a good B2B relationship with the clients.

To know more about account receivable management contact leading accounting service provider Meru Accounting today!