Late payments are a headache. They mess up cash flow, slow down growth, and add unnecessary stress to your day-to-day operations. If you’re in wholesale import-export, managing accounts receivable (AR) efficiently isn’t just nice to have—it’s a necessity.
So, how do you keep payments flowing and cash in the bank? It’s about tightening up your AR process with proven, actionable strategies.
In this article, we’ll explore the best practices for accounts receivable that streamline payment collection, improve efficiency, and set your business up for success. Whether you manage your processes in-house or consider outsourced receivable management, these actionable strategies will make a real difference.
Why effective accounts receivable management matters
Did you know that small business owners spend about 10% of their workday chasing unpaid invoices? And businesses often wait an additional 14 days past the due date to get paid. That’s a lot of time and effort spent on something that doesn’t add to your bottom line.
Late payments don’t just cost time—they create significant cash flow stress. In Xero’s 2022 report, late payments were linked to AU$1.1 billion in annual losses for Australian small businesses alone. This highlights why having efficient accounts receivable (AR) processes isn’t just about being organised—it’s essential for survival and growth.
When you neglect accounts receivable processes, you might face:
- Cash flow bottlenecks: Late payments can leave you struggling to cover expenses.
- Wasted time: Chasing overdue invoices takes resources away from core operations.
- Strained relationships: Poor communication around payments can frustrate clients.
By implementing payment collection solutions that follow proven AR best practices, you can keep payments on track and ensure your business runs smoothly.
8 Best Practices for Accounts Receivable
1. Establish Clear Payment Terms Upfront
One of the most effective ways to prevent late payments is to set clear, unambiguous payment terms right from the start. A solid payment agreement ensures both you and your client are on the same page about expectations.
- Be specific: Clearly outline payment terms, due dates, late fees, and acceptable payment methods in all contracts or agreements.
- Get confirmation: Ensure your clients acknowledge and agree to these terms before commencing work.
By establishing clear terms upfront, you create a foundation for timely payments and avoid any misunderstandings later on.
2. Digitise Your AR Processes with Automation
If you’re still manually managing invoicing and reminders, it’s time to get digital. Automated systems not only save time but also significantly improve your chances of receiving payments on time.
- Automated invoicing: Use tools to instantly create and send accurate invoices as soon as services or products are delivered.
- Automated reminders: Schedule email or SMS reminders at key intervals—before the due date and again when an invoice becomes overdue.
A recent study by PYMNTS found that 91% of mid-sized firms with fully automated AR systems report increased savings, better cash flow, and business growth. By automating tasks like invoicing and reminders, you free up your time for other priorities and ensure a consistent, reliable process for payment collection.
3. Send Accurate and Timely Invoices
Delays and errors in invoicing are among the most common reasons for overdue payments. It’s important to make sure your invoices are correct and sent on time.
- Double-check details: Ensure invoice amounts, client information, and any other details are accurate. Even minor errors can cause big delays.
- Invoice promptly: Don’t wait weeks to send an invoice—clients are far more likely to pay when invoices are issued promptly after the service or product is delivered.
When you send accurate invoices on time, you set the stage for faster payments and fewer disputes, leading to smoother cash flow.
4. Offer Flexible Payment Options
Clients are more likely to pay on time when you offer flexible payment options that cater to their preferences and convenience.
- Go digital: Accept credit cards, bank transfers, and online payment systems like PayPal, which offer faster and more secure transactions.
- Instalment plans: For larger invoices, consider offering instalment plans to make payments more manageable for clients.
By making payment as easy and flexible as possible, you improve your chances of getting paid promptly while also enhancing the client experience.
5. Implement a Credit Policy for New Clients
Before extending credit to new clients, it’s essential to have a structured credit policy in place. This helps mitigate the risk of late payments or defaults, especially with clients you haven’t worked with before.
- Credit checks: Conduct credit checks to assess the financial stability of new clients before offering credit terms.
- Set credit limits: Establish credit limits for each client based on their financial situation to reduce risk.
- Review regularly: Reassess the creditworthiness of clients periodically to ensure your policies remain relevant.
By setting clear credit policies for new clients, you can minimise the risk of late payments and maintain better control over your cash flow.
6. Monitor Your Accounts Receivable Ageing Report
Regularly reviewing your accounts receivable ageing report helps you identify overdue invoices quickly and take timely action to avoid further delays.
- Categorise invoices: Sort them by age (e.g., 0–30 days, 31–60 days) to easily identify overdue accounts and prioritise follow-ups accordingly.
- Act early: The longer an invoice remains unpaid, the harder it becomes to collect. Stay proactive in managing your AR.
By consistently monitoring your AR ageing report, you can stay ahead of overdue payments and ensure that your cash flow remains steady.
7. Build Strong Client Relationships
A strong client relationship can make a significant difference in how quickly clients pay their invoices. Maintaining open lines of communication helps build trust, which can encourage timely payments.
- Be proactive: Regular communication helps keep your business at the forefront of your clients’ minds.
- Handle disputes professionally: Address any concerns or disagreements promptly and professionally to avoid delays in payment.
When clients feel valued and respected, they’re more likely to prioritise your payments, contributing to healthier cash flow and long-term business success.
8. Consider outsourced accounts receivable management
As your business grows, managing accounts receivable in-house can become a challenge. Outsourcing AR management to professionals can help streamline the process and free up valuable time.
- Expert support: Outsourcing partners are experts in managing invoicing, follow-ups, and dispute resolution, ensuring a more efficient process.
- Focus on growth: With your AR in capable hands, you can redirect your attention to high-priority tasks, like strategic growth or expanding your offerings.
Outsourcing accounts receivable management can significantly reduce the time and effort spent on collections, ultimately improving your bottom line.
Managing accounts receivable doesn’t have to be stressful. By following these best practices—from setting clear payment terms to considering outsourced accounts receivable management—you can improve payment collection, boost efficiency, and maintain strong client relationships.
But putting these strategies into practice can take time and expertise, which is where the right support can make all the difference.
How Virtual Assistant Solution can help you
At Virtual Assistant Solution, our virtual assistants are experts in the best practices for accounts receivable management. From issuing invoices to ensuring timely follow-ups, we know what it takes to keep your payment collection process smooth and stress-free.
Here’s how we can help improve your accounts receivable process:
- Accurate invoicing: Our VAs ensure invoices are error-free and sent promptly, reducing the risk of delays.
- Proactive follow-ups: We manage regular payment reminders, so nothing slips through the cracks.
- AR tracking and reporting: Stay informed with clear reports that track overdue accounts and cash flow.
- System integration: We seamlessly work with your existing accounting or invoicing platforms for a hassle-free experience.
By outsourcing accounts receivable tasks to our experienced team, you’ll not only improve efficiency but also free up your time to focus on growing your business.
Ready to streamline your accounts receivable process? Contact Virtual Assistant Solution today to see how our expert virtual assistants can help you improve payment collection and grow your business.
