Any money that customers owe a business for services or goods purchased in the past is known as accounts receivable.  Usually, the company collects the money after a couple of weeks and it is considered an asset. To keep the cash flowing, many companies sell their accounts receivable to a lender. Checking the credit history of new customers, offering multiple payment methods, and incentivized invoices can help improve the efficiency of the process.

Check Credit History

One way to improve accounts receivable is through credit checks. It is a best practice to check a new customer’s credit history to make sure they have a narrative of paying bills on time before offering them credit.  Informing them of all the details before making any agreements and institute clear terms is another sound practice.  Conducting a more strict credit check may help improve efficiency, particularly if the daily sales outstanding (DSO) begins to worsen.

Diversify Payment Methods

Another way to improve accounts receivable is by offering a variety of ways to pay.  Considering how rapidly technology advances, it is more likely than not that new forms of payment will continue to be created. Most customers have a preferred payment method, and they are adopting new ones continually. The ability to accept more diverse payment methods such as credit cards, PayPal, traditional checks, wire transfers, and others is advantageous.  Fees and the speed that payment is received can be variable among each payment method, making flexibility an avenue to receive faster payment from customers.

Offer Payment Incentives

All things considered, the easiest method for faster payment is through payment incentives on invoices. Many companies offer an early payment discount, which can encourage a customer to submit payment before the invoice due date.  Usually, the terms of this discount are in the format of 1% 10 Net 30.   This means that the customer gets a 1% discount if they submit payment, and it is received within ten days of the due date on the invoice.  The discount is void unless a full payment is received 30 after the invoice date.

Performing credit checks, diversifying payment methods, and offering payment incentives can improve a company’s cash flow and increase efficiency. Efforts to obtain payment can be more efficient if there are clear expectations and terms, including distributing incentivized invoices as quickly as possible and making sure customers’ preferred payment methods are available.