An unsteady cash flow is a sign of inefficient Accounts Receivable. But when one experiences the heat of cash flow problems, most business owners wouldn’t have time or leisure to fix the Accounts Receivable. This is also why 80% of small and medium businesses fail due to cash flow problems.
5 Signs Your Accounts Receivable Process is Not Working
Cash flow troubles are the symptoms of Accounts Receivable that is not working:
Accounts Receivable problems don’t quickly translate to cash flow problems. The problems slowly simmer, go unnoticed, and create simple issues and trouble before gradually graduating into cash flow issues that cannot be readily fixed. It is essential for a business owner to catch these signs early to prevent impending cash flow problems. But how to spot these signs early? Our Accounts Receivable Experts at Outsourced Bookkeeping are here to help.
This blog lists five give-way signs that must be carefully monitored to prevent cash flow problems for your business. Read on to know them
5 Signs Your Accounts Receivable Process is Not Working:
Lack of good Accounts Receivable policies: Accounts Receivable is an extensive and meticulous process with many steps. This translates to, many loopholes making it ripe for fraud, inefficiency and lack of productivity. A standard set of Accounts Receivable policies will mitigate the inefficiencies and pave the way for improved AR performance. Credit incentives, versatile payment options, credit review protocols and well-structured credit policies are some standard procedures we suggest for our clients at Outsourced Bookkeeping.
Poor customer communication: Lack of proper communication protocols is the leading cause of AR collection problems. Small and medium businesses must have standard communication policies to adhere to at the start of business relationships. Most did not have a manual of follow-up procedures that needed to be adopted for AR collection. All these businesses are plagued with AR collection problems that eventually trigger cash flow problems.
Your AR system cannot identify high-risk accounts: The inability to identify high-risk accounts is a telling sign of the impending risk posed by your current AR process. By identifying high-risk accounts, our AR teams prioritize AR collection to minimize the overall DSO and improve the collections. AR software today automates the identification of high-risk accounts and also helps streamline communication with customers to improve collection.
Inability to get estimated payment times: An AR system that cannot provide estimated payment timelines can trigger problems for CFOS and controllers who predict and manage the cash flow. This can hamper their ability to accurately optimize the cash flow as the requirements.
In such case, they will have to manually source this information which could delay the optimizations. Having this information at hand helps our teams to prioritize and focus on high-risk payments. Without this information, your team will have to spread their efforts which will never help in the case of AR collections.
Sticking to manual Accounts Receivable process: Manual Accounts Receivable process is a breeding ground for errors, invoice delays, and reworks that cost time and money. It offers no visibility into the process, is vulnerable to fraud and is resistant to quick optimization.
The only reason a manual Accounts Receivable process seems to be working for you is its inability to resolve existing problems before it is too late. Even identifying and fixing the issues of manual Accounts Receivable demands a lot of time and effort, which most businesses may not afford. So if you are adopting manual AR, we advise you to recheck your entry process or, even better, upgrade to automated Accounts Receivable.
Outsourced Bookkeeping: Best Remote Accounting Firm for Outsourced Accounts Receivable Services
If you are a business owner just starting, it is only a matter of time before you feel the pressure of cash flow problems. These cash flow problems are symptoms of lax Accounts Receivable that need to be tweaked and treated. The best way to prevent them together is to identify the signs of impending cash flow problems caused by your current Accounts Receivable.
As a remote accounting firm specializing in Accounts Receivable, we have helped hundreds of businesses improve their cash flow by quickly adjusting their Accounts Receivable Processes. If you consistently face cash flow problems or AR collection issues, our Accounts Receivable experts can soon hop on a call to help you fix them.
If you want to revamp your Accounts Receivable Process, our seasonal experts can help design a tailor-made Accounts Receivable process according to your cash flow requirements. For outsourced Accounts Receivable Services, you can contact us here: https://www.outsourcedbookeeping.com/