
ACCOUNTS RECEIVABLE
Accounts receivable departments are responsible for managing the movement of revenue by way of the invoicing and collection process. Beginning at credit application through to invoice processing, follow-up, and late payment collection, the purpose of this AR business process and mission of accounts receivable departments is to deliver a healthy and consistent cash flow. A cash flow that will support and maintain profitability and overall good business growth for the organization.
A recent study illustrated that over 30% of small- to mid-sized businesses in North America currently experience or expect to experience difficulties with cash flow directly caused by late payments. Cash flow issues that will negatively impact their ability to pay employees, suppliers, forecasted company investments and overall financial decision processing.
What is the actual accounts receivable cycle?
The main goal of the AR process: To receive cash owed for goods and services into the business before invoices are past due or before they become bad debt. Achievement of this AR goal will deliver, support and maintain the profitability and overall good business growth we discuss in the short summary above.
What’s considered a successful accounts receivable process?
To be considered a successful AR process companies must consistently bring early payments in whenever possible. The ultimate goal of these efforts is to consistently support the company’s balance sheet economics. This is accomplished by minimizing past due payments through efficient and continual monitoring and follow-up. Sounds simple, however, consistency and diligence are the make-or-break in AR processing. This is discussed in more detail in receivables reporting below.
The mechanics: The AR cycle involves a straightforward and continuous process for notifying clients and customers about the money they owe, when it’s due and to communicate early payment benefit incentives, if offered. A standard Accounts Receivable cycle might look something like this:
- Sales and delivery – Customer notification regarding the sale and delivery of a product or service
- Invoice generation– Once the receivables department generates the invoice in the accounting system it is then sent to the customer and triggers the collection timeclock.
- Payment collection – Typically customers have 30 days to pay, however, this can vary based upon individual payment arrangements
- Reconciliation with the accounting system – Process begins again as payment is collected or written off as a result of longer intervals of non-payment
Additional steps will include:
- Sending payment reminders mid-month and weekly intervals as collections are due
- Sending late payment reminders once in payment default
- Escalating the matter further for late payments
By working with an intelligent B2B platform like eTreem your organization can minimize the cost of processing credit cards and realize savings in your bottom line. Contact us to find out how
Accept Credit Card Payments Without Costly Transaction Fees
Recent Blogs
Account Receivables Series #3 Conventional Processing vs Modern-Day Automation
The conventional approach to accounts receivable has been to manually generate invoices from accounting software or even Microsoft Excel spreadsheets in batches, sometimes daily. These invoices would then be printed and posted or, in more recent times, may have been...
Level III Credit Card Transactions
Level 3 processing is utilized in B2B and B2G transactions to help secure lower interchange rates and monitor spending. It involves the input of additional data through extra line-item details outlining the nature of each transaction for both the business and credit...
5 Good Reasons to Accept Virtual Card Payments
Businesses are more likely to experience fraud on their account when their physical credit card is used in many places. It can also be an administrative nuisance to have to redistribute physical card information to recurring merchants and vendors following fraudulent...
Accounts Receivable Series # 2 The Cycle
Key to success of the AR process is for businesses to set clear and realistic expectations for managing this cycle. For example, the average payment cycle in the US is 31 days, with larger companies taking 1 ½ to 2 times longer. As a result, businesses must carefully...
B2B Credit Card Processing Simply Explained
As a business owner, knowing the basics of payments processing can help you make more informed decisions as you better understand the differences between various credit card processing providers. With so many ways to accept payments, it’s important to have the right...
Important Payment Processing Terms to Know
Every business owner needs to know about payment processing terms and concepts. Here are five payment processing terms and definitions to help you crack the code! Batch When you have multiple transactions that need to be processed, they are bundled together and...
What are Virtual Cards and How do They Work?
Virtual credit cards are randomly generated digitized 16-digit numbers used in place of a physical credit card. Thanks to tokenization and spend controls, virtual credit cards are one of the most secure payment options for business buyers. A study by Juniper Research...
What is Level 3 Credit Card Processing?
Level 3 credit card processing is probably one of the best-kept secrets of the credit card processing industry for customers performing Business to Business (B2B) or Business to Government (B2G) transactions. Simply put, Level 3 payment processing is an advanced form...
Understanding B2B Credit Card Tiers and Pricing Structures
No longer just a customer convenience, offering credit card payments has quickly become a business requirement in accounts receivable for SMEs, medium and large-sized enterprises. Considering this growth in B2B card payments, it’s important to review what rates you...