So, it's well worth it to devote time and effort to improve it. For example, inaccurate addresses can cause invoices to be mailed to the wrong place, which results in late payments. Customer accounts should be audited on a consistent basis to check for anomalies like unusual or inappropriate payment terms, credit limits, discounts and the like.
Changes to customer data should be properly documented, and controls should be put in place to prevent unauthorized people from being able to access or edit data. Establish a Clear, Concise Credit Approval Process - All too often, businesses slip into detrimental credit habits in order to boost sales. Of course, this leads to a vicious cycle that can ultimately be disastrous for a company.
Extending credit can be a very good thing, but a clear process for doing so must be established. It should include clear instructions regarding when and how to evaluate and override credit limits, when to place accounts on hold and how the application process works. Regular reviews of the credit approval process should be performed because circumstances change.
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Establish an Effective Billing Process - The billing and invoicing of customers must be accurate and streamlined to be effective. Errors in pricing, units of measure and the like can wreak serious havoc. Further, invoices must be created and sent in a timely manner, and the manner in which they are produced should be consistent and defined.
One way to improve billing and invoicing is by automating as much of it as possible, so don't be afraid to rely on technology here. Use exception reports to pinpoint problematic accounts.
Good accounts receivable management practices
If possible, set up a customer portal to shift some of the work to customers while giving them a sense of autonomy. Hone the Cash Application Process - Upon arriving, payments must be applied correctly. They should be applied to the correct customer and to the appropriate invoices. Otherwise, if disputes or issues arise later, trying to zero in on the initial problem will be very difficult. Payments should also be applied quickly to ensure that at any given moment, you know which accounts are current and which are past due.
One potential way to optimize the process is by offering a limited number of payment options for simplicity. Post journal entries promptly and long before cutoff dates. Whenever possible, avoiding dumping cash into suspense accounts until you have the time to figure out where it's actually supposed to go.
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Optimize the Collection Process - Properly optimizing accounts receivable makes it much easier to collect payment in a timely and effective manner. When payments are properly applied, for instance, it's easy to determine which accounts are at risk of going into default.
Collection efforts should be consistent and methodical. A clearly defined process for negotiating payment plans should be established to ensure that it dovetails with the company's overall objectives. Our self-study materials are authored by top-quality, industry experts. Each self-study package includes a robust collection of learning and reference materials to help you cover the information efficiently and put it into practice immediately.
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Choose a format. Add to Cart. Review format options. How to improve Inventory and supply chain management using best practices.
Credit Today’s Best Practices For Credit, Collections, and Accounts Receivable Management
Identify the accounts receivables best practices and improve credit terms management. Identify inventory and supply chain management best practices. Identify accounts payable management best practices. Improve cash and working capital management skills using latest technology and best tools. Enhance the understanding of the cash cycle and cash cycle management. Accounts receivables presentation and provision for doubtful debts.