Best Practices To Improve Accounts Receivable Processes

 

Accounts Receivable For Business Owner

If you re new business owner, or have recently switched accounting methods from cash to accrual accounting, you may not be familiar with accounts receivable. Accounts receivable plays an active role in the accounting cycle.

Accounts receivable totals directly affect your net income since they are considered revenue, but subsequent collection of any receivables balances do not affect your retained earnings, since they are already part of your revenue total. In addition, accounts receivable is permanent account and is not affected by closing entries. Sending an invoice to your customers promptly helps to ensure that payment will be made promptly.

Send invoice immediately: Dont wait week before sending invoice. Once the purchase is complete, invoice should be completed as well.

Use accounting software If you can: One of the nice things about using accounting software is that once a sale is process, you can immediately invoice your customers.

Be sure terms are front and center on your invoice: If you expect payment in 30 days, be sure that note is prominently on the invoice. Remember, your customers ca pay you on time if they do know when payment is due. Note that sales tax is not included in this journal entry, because sales tax remittance is handled in a separate transaction. The easiest way to post customer payments is by accepting payments online. However, many people still have their customers remit payments through mail.

Here are some tips to manage customer payments properly:

Multiple payment options:

Quickest way to receive payment is to provide your customers with numerous payment options. While online payments offer greater convenience, some businesses still prefer to pay bills by check. Make sure your customers have the option to do both.

Online payments are posted accurately:

If your accounting software automatically posts payments from your bank, be sure that payment is posted properly. In most cases, automatic posting is complete without issue, but there are times when payments are put in limbo or even posted to the wrong account.

Read More: https://www.myaccountsconsultant.com/accounts-receivable-process-8-steps-for-improving/