Accounts Receivable Management
Effectively managing accounts receivable requires a thorough understanding of the Credit-to-Cash Cycle.
The first step in the process is to determine the risk/reward of extending credit terms to the potential client and granting the proper level of credit. Ask for and review credit references and possibly purchase a credit report on the customer to determine their payment history.
The next step is to manage the billing process effectively. It's important to send invoices that are accurate, professional in appearance, and mailed in a timely manner. You may also want to establish customer service centers to handle billing inquiries.
Unfortunately, managing delinquent accounts is often one of the most time-consuming aspects of the accounts receivable management process. The goal is to set priorities and strategies for collecting on these accounts while balancing results, costs, and the need to preserve the customer relationship - an important consideration as most companies understand that it's more profitable to keep a current customer than to acquire a new one.
In the unfortunate event that an account has been "charged-off," businesses typically will pass the account to a third party to recover the cash in a legal and responsible manner, while at the same time insulating the client from negative associations.
The recovery process often utilizes professional collection agencies and attorneys to do everything from purchasing past-due portfolios to assisting on bankruptcy claims.
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This information is only intended as advice. Please consult with a collection agency or an A/R collections consultant for additional information.