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Accounts receivable and accounts payable are the two main factors that affect your business cash flows. Managing both is an important skill that needs to be mastered for an effective financial stability. It also helps boost the overall performance of the company and avoid cash problems. Properly tracking accounts receivable and payable involve the creation of invoice on time, delivering the receipts, tracking the shipping orders and maintaining financial transactions. Here are a few tips that will help you in managing accounts payable and receivable in an effective and efficient manner.
1. Organize Your Transactions
Be organized and send out invoices immediately after the transaction has been completed. For a regular delivery of goods or when goods are taken on credit, send the invoices when they are due. It may be difficult to remember all the transactions for which payments are expected in future. Hence, make sure you keep a proper record system and organize all your transactions. See to it that your accountant effectively organizes all your transactions as your books contain valuable information and prevent you from forgetting or making incorrect invoices. For businesses that have multiple transactions daily or weekly, it is difficult to track different transaction details from different vendors. In such cases, it is strongly recommended that you prepare books of account. In case you need help in creating your books of account, then consult a professional bookkeeping firm to assist you in this matter.
2. Establish Timelines
When you send out invoices, be clear about the payment deadlines and penalties like an interest charge for overdue accounts. It will not only ensure that your debtors pay on time but also prevent bad debts. When establishing timelines, keep it for a short time. The aim should be to close out a transaction as early as possible.
At the same, establishing timelines can also ensure that you are paying your debts on time. You do not attract any interest rates and plus, establishing timeless will help you have sufficient funds readily available as and when the payment dates are due.
3. Initiate a Credit Policy
This should be a planned company process and not just decided by your accountant. When you consider establishing a credit policy for your company, keep these following factors in mind:
4. Use Automation for Tracking Transaction
Tracking can be a painstaking process especially when you do it manually. For a systematic process of tracking your daily transactions, use accounts payable and receivable software to automate transactions. Your transactions will be recorded in real-time and plus, it will allow you to avoid delinquency or interruptions in workflow. Tracking and managing accounts receivable and payable is important not only for assessing effectiveness but also to help the owners to make smarter financial decisions. Therefore, use automation as it will save you time and errors will be avoided.
Managing accounts payable and receivable can indeed be a challenging task especially when your business is growing. If you are facing any difficulty to manage both, then contact a professional to help you manage your accounts in a manner that will improve your working capital and finances.