5 Top Tips for monitoring your accounts receivable

Accounts receivable is a crucial aspect of any business’s cash flow. It represents the amount of money that is owed to your business by your customers. Monitoring your accounts receivable is essential for understanding your cash flow, as it can help you identify potential cash flow problems and improve your financial position.

• Keep track of your AR aging report:
  The AR aging report is a summary of all outstanding invoices organised by the date they were issued. It’s an essential tool for monitoring your accounts receivable and tracking how much money is owed to you. By monitoring the report regularly, you can identify overdue payments and take steps to collect them. You can also use the report to estimate future cash flow by projecting which invoices will be paid on time and which will be overdue.

• Set up a system for invoicing and collections:
  To keep your accounts receivable under control, you need a system for invoicing and collections. This system should include the steps you take to bill your customers, send reminders, and follow up on overdue payments. It’s essential to have clear payment terms, including due dates, late fees, and payment options. By having a clear system in place, you’ll reduce confusion and increase the likelihood that you’ll be paid on time.
• Check customer creditworthiness:
  One of the most important things you can do is to check the creditworthiness of your customers. Before you offer credit, you should research their credit history, business reputation, and payment practices. This will help you avoid customers who are likely to pay late or not at all. You can also use credit monitoring services to keep an eye on your customers’ credit scores and financial stability.

• Use automation tools:
  Automation tools can help you stay on top of your accounts receivable and reduce the risk of errors. For example, you can use accounting software that automates the invoicing and collections process. You can also use payment processing tools that automatically reconcile payments with your invoices. These tools save time and improve accuracy, making it easier to monitor your cash flow.
• Conduct periodic reviews:
  It’s essential to conduct periodic reviews of your accounts receivable to identify areas for improvement. You can use the review process to analyse your payment terms, check for errors or discrepancies, and identify customers who are consistently late with payments. By reviewing your accounts receivable on a regular basis, you’ll be able to spot potential issues and take corrective action before they become major problems.

Monitoring your accounts receivable is essential for understanding your cash flow. By setting up a system for tracking them, monitoring your aging report, sending timely invoices, following up on overdue payments, and analysing your accounts receivable turnover ratio, you can improve your cash flow and ensure the success of your business.

Who is ActionCOACH’s Business Coach Mark Dilks?

Mark Dilks is an accomplished business leader, experienced coach, mentor and business builder. He supports business owners, executives and teams across Milton Keynes, Bedford, Northampton, Luton & Dunstable in all aspects of building profitable high growth businesses; from start-up phase all the way through to maturity and divestment. No matter what challenges you are facing, Mark will invariably have encountered a similar situation previously and will be able to support you to quickly and efficiently overcome your business hurdles by sharing examples of how other business have solved similar problems that you are experiencing. He is motivated, driven, tenacious and is able to get the very best out of all the resources available to his clients and to ensure that the maximum results possible are achieved.