We are discussing some tips to better manage AR and why those not managing this properly could be leaving thousands or even MILLIONS of dollars tied up on the Balance Sheet each month.
Keep Your Cash Flow Moving with Strong AR Practices
Accounts Receivable (AR) represents the lifeblood of your cash flow. It’s the money owed to your business by customers for products or services you’ve already delivered. While it might sound simple, managing AR effectively requires a structured approach to ensure timely collections, healthy customer relationships, and a steady cash flow.
Your team has to be engaged DAILY if you want results. They have to be on board and believe in the strategy you are presenting.
Here’s a quick breakdown of what your AR team should focus on:
(note this is not an all-inclusive listing, but some main details you need to be looking at closely with your team)
Daily Priorities 🚀
- Send invoices promptly and accurately. Do not hold invoices and batch process.
- Follow up on overdue payments with clear, professional reminders. Always have daily engagement on your AR.
- Record all payments received to keep your ledger up-to-date. Cash should be recorded and posted daily, with aging reports also updated daily. Trust me.
Weekly Checkpoints 📆
- Review outstanding invoices and identify trends or problem accounts. Management should stay close to the process, but let your team work this on their own and loop you in when needed.
- Communicate with your sales or customer service team about any disputes. Too many times we work in silos. Make sure everyone is on the same page and tracking any issues.
- Track cash flow to ensure collections align with financial goals. You should track how much cash is coming in the door (and out the door) each day.
- This is something I highly recommend for SMB’s and can set you up with how to do this in about 1 hours time of work. Let’s chat.
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Monthly Tasks 📊
- Analyze AR aging reports to spot slow-paying customers. Look at things like cash collected, ADP, DSO, Top 25, and your Watchlist. Contact me today if you want to know what a Watchlist is and how this changes the game in managing AR.
- Evaluate payment terms and adjust strategies as needed. You need to have a strong handle on terms and limits. If you aren’t proactively engaged here, this could pose financial risk.
- Report on AR performance to key stakeholders, such as controllers or CFOs. I can’t stress enough the importance of making sure your management group is “in the know” to some extent on how AR is performing. Cash is King.
By staying proactive and consistent with these practices, your AR process becomes a powerful tool for maintaining financial stability and growth.
Need expert help managing your AR from start to finish?
Email brad@guernseyconsulting.com to learn how Guernsey Consulting can streamline your AR process and keep your cash flow moving. Let’s work together to transform your AR into a growth engine! 💼📈
