9 Signs that can Drag you Towards Account Receivable Problem

by Willox Gaulard F & A Consultant

Every company’s biggest concern is cash, regardless of their sizes. Whereas, hiring an account receivable service provider is one of the easiest ways to ensure a healthy cash flow of the business. Unfortunately, not every company is efficient enough to manage their account receivable accurately that eventually hampers the cash flow of their business, which is not a good for a small or a growing business. The fact is; if your business offers credit terms, then you probably have an account receivable problem and you don’t even realize how impactful it can be on your bottom line.

Here we discuss 9 telltale signs that will help you to recognize whether your business is going through an account receivable problem or not?

outsource account receivable

Sky High DSO (Daily Sales Outstanding): If you have a long DSO (daily sales outstanding) that means your business has the habit of extending credit to clients. If your bills are unpaid for too long; it will eventually lead you towards financial risk. Also, high DSO negatively impacts your cash flows. If it continues to be the same, then there is a less chance that you will collect on those overdue accounts.

Lack of Account Receivable Management: Improper accounts receivable management can lead the business towards bankruptcy because it helps to identify the reason of non-payment of clients and reduce the bad debts to a greater extent. It needs a team of experts to efficiently manage their accounts receivable and properly reconcile credit card and bank statements.

Collecting Payments After 90 Days: If you are collecting unpaid invoices after 90 days and are not in touch with the client for this long, then surely they won’t take your call seriously. Invoice reminder should be sent within 30 days block or even before that when you gave them credit. If you wait for three months to collect the payment, it will again become a bad debt for your firm.

Customers can only Pay you via Check: If you keep a condition for the client, that they only need to pay via checks, this can again become a hurdle for you to receive the payment from your client. Use the automated system, such as keep an option in the invoice reminder email of pay now or allow the client to pay you via credit, debit cards.

Terrible Customer Experiences: While collecting payments, sometimes you become rude, which eventually hampers your company’s reputation in the market because gaining customer loyalty is very important for every firm. Too often there are many stories of an oppressive approach to a low-risk account management that has damaged customer experience. Try to keep a right tone while talking to a customer and create more friendly strategies.

Invoice Disorganization: If you know that you have sold some goods or services on credit basis, you are not aware of that to whom and when you gave the product, then your firm has a serious problem of account receivable. Each and every month you must maintain the records of credit holders of your company and track their payments thoroughly. You must analyze from your account receivable management that who is paying late and who has the habit of making late payments.

No Credit Policy: Although there will be many businesses who want to do business with you, before giving any credit or investing in that business you need to do the background and credit check of the company, whether they are capable of paying you back. You must have a credit policy in place so it becomes commonplace to check on new business credit.

Never Checked the Customer Credit Report: Being a business owner, you must regularly go through the customer credit report. In case you might have missed some entry or the client have not paid you, but your books of account reflect that you have received the amount. So it is essential to verify the customer credit and analyze the flaws.

Credit Granted by your Sales Team: If your sales team grants credit to the customer, then you are in a severe problem, as there are chances of fraud. You must not give the authority to the sales team to grant and manage your credits, go for an expert advice or hire a team that will help you out to efficiently manage your accounts receivable

Final Words-

If you relate to any one of these account receivable management problems, you are likely to be in a bigger cash flow issue then you may realize. If you are lacking visibility into your team, DSO or your customer communication, you must look for efficient ways to overhaul this problem. According to the latest trend, outsourcing accounts receivable has become popular among businesses, as they have a team of experts, suitable infrastructure and deliver services within a turnaround time at affordable rates.

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