In business, accounts receivable (AR) is the term for the outstanding invoices that a company has or the amount of money that’s owed to them by customers for goods and services already rendered. The AR usually comes in the form of a line of credit that must be paid in a relatively short timeframe, just like an IOU that should be paid off as soon as possible. However, ARs should not to be confused with accounts payable or AP. Whereas APs involve a business’s debt to its suppliers or partner vendors, ARs involve a debt to be paid by customers to the business after a sale.
Unbeknownst to some businesses, maintaining a solid process for handling ARs can be a competitive advantage. The option to take on credit can be extremely enticing to would-be customers, and it can give them the incentive to transact with one company over another. Indeed, it might even be more beneficial to offer AR arrangements, given the following factors for both you and your customer:
If improving your accounts receivable system is one of your business priorities this year, here are six tips that can help you achieve that:
The last thing you need to do to improve your accounts receivable process is to make sure that your current system is working. If your sales, customer base, and range of products and services has significantly changed—and your way of managing ARs isn’t enough—don’t forget to adjust your approach. With a good system in place, ARs will become less of a hassle and even become a source of future opportunities for your company.