{"id":72037,"date":"2024-07-01T15:22:28","date_gmt":"2024-07-01T14:22:28","guid":{"rendered":"https:\/\/www.cashontime.com\/en\/?p=72037"},"modified":"2025-02-19T11:21:49","modified_gmt":"2025-02-19T10:21:49","slug":"accounts-receivable-management-best-practices","status":"publish","type":"post","link":"https:\/\/www.cashontime.com\/en\/articles\/accounts-receivable-management-best-practices\/","title":{"rendered":"Accounts Receivable Management: Best Practices"},"content":{"rendered":"

The accounts receivable<\/a><\/strong> is an accounting entry that allows for the recording of all customer claims<\/strong>. Effective management of accounts receivable is essential for maintaining a company\u2019s financial health, especially regarding its cash flow. Indeed, accounts receivable represent incoming cash flows expected by the company<\/strong>. Significant delays, particularly due to unpaid invoices, can disrupt this balance and increase the working capital requirement<\/strong> (WCR) substantially. This is why we propose to discover the best practices in managing accounts receivable.\u00a0<\/p>\n

Understanding Accounts Receivable<\/h2>\n

Accounts receivable include both not yet due invoices<\/strong>, meaning those sent to the customer but whose payment term has not yet expired, and past due invoices<\/strong>, meaning those for which the payment deadline has passed.\u00a0<\/p>\n

Therefore, accounts receivable represent the total amounts owed by customers<\/strong> to the company. \u00a0<\/p>\n

Once invoices are settled, they move from accounts receivable to become part of the revenue.<\/p>\n

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As a result, accounts receivable have a direct influence on the company\u2019s cash flow level<\/strong>, as it summarizes all incoming flows generated by the company\u2019s activities. \u00a0
\nIf the accounts receivable increase due to clients extending payment terms or payment delays, it can create significant cash flow discrepancies<\/strong> and, in the most severe cases, lead to a cessation of payments. However, in most cases, these discrepancies result in an increase in the working capital requirement<\/strong> (WCR). And this can prove costly for the company. Indeed, it may need to finance its WCR through short-term loans such as lines of credit or discount financing, which tend to have relatively high interest rates.<\/p>\n

To avoid such consequences, a company can adopt the 6 best practices that we will detail shortly.<\/p>\n

Establish Clear Payment Terms<\/h2>\n

The first step in good accounts receivable management is to establish clear payment terms<\/strong>. It is crucial to have a well-defined credit policy that expressly provides for the payment conditions applicable to contracts based on the customer\u2019s profile. These include:\u00a0<\/p>\n