Accounts payable and accounts receivable are the twin foundation for any business’s finances. You lose a lot of money when you mismanage these aspects.
To get the most out of your AP/AR management, you need excellence in bookkeeping and a shift in perspective.
Here are seven major tips on how to keep your AP/AR management in line.
1. Establish Absolute Credit Policies
The first and biggest tip to get your AP/AR management in line is to establish concrete rules for your AP and AR departments.
This means establishing hard payment terms for your customers, and protocol for when you submit payments to your suppliers. You can customize this to give incentives to your long-term customers.
2. Shorten Your Transaction Cycles
The longer your cashflow sits with a single transaction, the more your entire system can clog up. For example, if you must wait until a sale to pay your supplier, that can hurt your supplier relationship.
The less time spent on each transaction, the fewer logistics and employee time spent on them, saves you in the long run.
3. Increase Your Communication
Building a constant flow of communication between accounts payable and account receivable is a vital item to keep them running.
Set up special email accounts and check-in methods for each transaction. If one side effects the other with a decision, both sides should talk about it.
4. Double-Check Older Accounts
While every transaction and account need to keep a regular record of all that it does, it is good to put extra attention into older accounts.
The longer an account works, the more data it gets. Which becomes more data you need to sort through when trying to sort out an issue. Spending a bit of extra time checking in with older accounts can save you a lot of frustration in the long run.
5. Utilize Automation
You may make hundreds, if not thousands of different items and notes and records every day. Between both accounts payable and accounts receivable, it can add up. Automation will be a wonder to keep it all together.
Automation software can track each receipt made, as well as any number of different documentations. Automation software can also distribute basic responses to keep everyone involved up-to-date.
Saving that busy work from taxing your employees can keep your AP/AR management clean and organized.
6. Offer Incentives or Penalties
Dealing with slow or late payments is a major drag on keeping your income organized. To help avoid late payments, you can offer your customers incentives for getting payments in on time.
These can be percentages off the balance or better pricing down the line. You can also go the opposite route and charge late fees and harsh penalties for missed payments.
7. Know When to Move On
Sometimes you can only put so many resources into a debt-filled account. When it costs more to squeeze out a payment than the payment is worth, consider moving on.
You can sell these accounts to collection agencies. You can also find a factoring service to sell off the invoice for the accounts.
Improving Your AP/AR Management with Better Bookkeeping
Even with these seven tips, AP/AR management is a constant struggle. You need to focus on adapting to the changes.
When you are having trouble keeping up with the issues, we here at Books by Schmidt are here to help. Contact us today to learn more about our services.