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How to Manage Your Accounts Receivable Turnover

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Managing accounts receivable is one of the biggest pains in any business, let alone managing the turnover. But despite it’s difficulty, it is also an extremely important part of managing any business and keeping cash flow headed in the right direction. Today we’ll discuss some of the ways you can mange turnover so it doesn’t get you or your business in the wrong place at the wrong time.

First up, do you know your receivables turnover ratio?

When thinking about trying to improve or manage accounts receivable turnover we need to know where we stand. The easiest way to do this is using a handy ratio that will tell us how quickly you’re collecting your total balance of accounts receivable in any given period. Generally a higher number is better because it says that you’re probably able to invoice and collect from your customers on a regular and timely basis. But what if I am not so quick to collect?

Tightening up your turnover and cash flow

When you find yourself short on cash and sales aren’t to blame, the next stop is generally your accounts receivable turnover. You need to make sure that when you sell a product you deliver it quickly and then get paid quickly. This comes down to an efficient and well run accounts receivable flow. Starting with creating and sending invoices. Make sure your invoices are being created as soon as the product is delivered and even being included when deliver takes place. This can also work for a service by simply rendering the invoice at time of service delivery, really no different.

How quickly are you being paid?

When your cash flow is looking weak and your accounts receivable turnover is down it’s time to look at your days sales outstanding or DSO. This is one of the most likely places where you are probably losing out. The general issue we see is that companies deliver their goods on a timely basis and even get their invoices out quickly as well, but their customers just aren’t paying them fast enough. It’s not that the customers aren’t good for it or are gong to skip out of the bill. It’s simply that their customers are just as busy running their businesses and paying invoices isn’t high on their priority list.

Remind, remind, remind

Staying on top of invoices from the very get go is the key to success when handling accounts receivable turnover. If you send a notice as soon as an invoice has been cut, followed up by another notice a few days before the invoice is due you’re almost guaranteed to get paid faster as your going to rise higher on the list of invoices waiting to be paid. These reminders can be friendly and helpful ways for your clients to remember you. No one wants to be past due on a bill and these reminders help your clients remember before you have to start sending them past due notices.

Hopefully we’ve given you a few ways to manage your accounts receivable turnover better today and if you’re finding this all a big hassle and want a way to make it better give us a call, our solution is designed to automate this entire process end to end, better still we integrate directly with your existing accounting software, nothing new to learn and nothing to install!