What Is A Receivable Management Service?

Receivable management service refers to the process of keeping track of what your customers are purchasing from the company on credit basis. It can also be known as buying on credit.

The service involves developing credit policy, settlement terms, and credit policy, sending follow-up correspondences to your customers, and then making collection of all due payments. Receivable management is more of buying on credit, as the customers will receive goods and services without making any upfront payment.

Why Are Receivable Management Services Necessary?

When you are chasing late payments, it may consume valuable time for your finance team, which they may spend on other strategic tasks. Many businesses may go for outsourcing their task to receivable management services. Some reasons why receivable management system are important are as follows:

Improved Cash Flow: When the unpaid invoices get collected, the cash flow management may affect. The goal of receivable management services is to get the cash in your pocket back and simplifying the financial stress.
Cost-Effectiveness: If you want to build internal collections team, there will be a need of significant investment in technology, personnel, and training. Receivable management services will be a more affordable option that will save your business from unnecessary hassle. They will also save your expenditure on developing in-house team.
Focus on Core Activities: The receivable management system will free your burden from collections and you can concentrate on key business activities. It will permit your staff members to put their hard-work in the growth of the company.

Along with the above-mentioned reasons, the services will also help with your cash flow management, which will help you manage your company finances better.

Different Types of Receivable Management Services

The different types of receivable management services may represent a unique scenario of how credit is extended to the customers.

TYPES OF ACCOUNTS RECEIVABLE:

Trade receivables
Non-trade receivables

Secured receivables
Unsecured receivables

Trade receivables: Trade receivables refer to the payments that the customers owe for selling the services and goods as a part of their business.
Non-trade receivables: Non-trade receivables include the amounts that are owed to the business and do not directly relate to the primary operations. Some examples may include interest receivables, reimbursement from third parties, and tax refunds.
Secured receivables: Secured receivables refer to amounts that are backed by collateral. It signifies the long and short-term assets that the business holds as security in case the customer is unable to pay the amount.
Unsecured receivables: Unsecured receivables refer to payments that do not have particular collateral attached to them. These receivables are more risky for any business if the customers are unable to pay the amount.

What is Receivables Management Software?

Receivable management software refers to a tool that will automate the entire process of managing and tracking the amount that a business owes to its customers. The software also helps to streamline the collection of payment invoicing, improving cash flow, reporting, and reducing time spent on manual tasks.

Benefits of using Receivables Management Software

By using automated accounts receivable management software, you are hiring an employee who will not only abide by your orders but will work 24/7 for you. Let’s take a deep dive into the benefits of implementing receivable management software.

Improve Your Cash Position: When you have pending bills, you have to pay them. If you are unable to pay on time, you may have to pay extra for being late. Using receivable management software, it will be easier for you to remind customers of payments, identify invoices earlier in the process, and clarify your cash position.
Increase Control Over Cash And Working Capital: When you understand your cash position, you will improve your working capital. By effectively managing your working capital, you will make more strategic investments, hiring of new employees, and other investments to boost your business. It will all be done by receivable management software.
Increase Accounts Payable And Receivable Management Efficiency: The receivable management software will prevent you from wasting your time in knowing who, why, and when to call to resolve issues. The companies using this software will reduce the time spent to prioritize calls by nearly 6%, manage disputes by 13%, and solicit customers for payment by 62%.
Improve Customer Communication: A/R management software will also make communication easier with customers. You may be able to review account information, attach invoices, create mail merge documents, and communication analysis.

What Are Accounts Receivable Collections?

Accounts receivable collections are the process that businesses undertake to recover the money owed by customers for the goods and services that are provided to them on a credit basis. They are important as they directly impact the company’s cash flow and improve its financial health.

How Does a Business Handle Accounts Receivable Collections?

The AR procedure starts by generating the invoice, which clearly states the terms and conditions of the payment. The business will then send the invoice to the customers. It will then monitor the date for due payments. The company may send the reminders. If the payment is not paid on time, the company will begin with initiating the collection procedure.

The business using and managing accounts receivable will move quickly and avoid letting the due amounts go uncollected. This will help your business achieve its long-term goals. Collections management will also improve due to reasons such as discounts for early payments, different payment options, and other useful payment plans. All these techniques will help reduce uncollected payments.

Looking for a receivable management service? We are here to help you

If you are searching for some effective accounts receivable management software, CFO Mantra is here to help you with top-notch software. It will not only enhance financial stability but will also help to maintain a healthy cash flow.

By implementing best practices, businesses will optimize their accounts receivable procedures, which will help them achieve long-term success. We will also help to embrace future trends and leverage technology solutions for your organization.