4 Best practices to improve your accounts receivable workflow

December 6, 2021
December 6, 2021

As a small business owner, prioritizing your accounts receivable (AR) is a must. After all, the more efficient you are at collecting payments from customers, the better your cash flow will be.

Mastering these 4 best practices will both improve your accounts receivable workflow, and help your business thrive financially over the long term.


Best practice #1: Invoice promptly

Invoicing promptly is the first step to getting paid on time.

A thorough, accurate invoice is the easiest kind of bill to pay.

You will collect payments more quickly—and spend less time clarifying charges with clients—if your invoices include a detailed breakdown of the services or products you provided.

Rather than waiting until billing amounts get uncomfortably high, it’s best to invoice clients monthly (unless your contract with them specifies a different payment interval).

This is important for 2 reasons:

  1. If your customer budgeted for their purchase, and you invoice them late, they might have reallocated those funds in the meantime, making it difficult to pay you on time.
  2. Your customer will need your invoice to close out their month-end bookkeeping.

Remember: the faster you invoice, the faster you’re likely to get paid, and the more efficient your accounts receivable turnover will be.

Best practice #2: Use cloud-based accounting software

You’ll find it easier to stay on top of your accounts receivable workflow if you use cloud accounting software to manage your invoicing process.

With a program like QuickBooks Online (QBO), for example, you can:

  • Generate AR aging reports to keep track of outstanding invoices
  • Automate both recurring invoices and follow-up client payment reminders
  • Better monitor your cash flow

Adopting cloud-based accounting software also means you can access your financial data—and generate and send out client invoices—when you’re on the go.

Best practice #3: Consider your payment methods

Offering various payment options—like cash, cheque, credit card, and pre-authorized debits (PADs), for example—can make it easier for clients to pay invoices on time.

You should, however, evaluate each payment method carefully to make sure fees won’t eat into your profits, and sluggish processing won’t impact your cash flow.

Here are some points to consider:

  • Although cash is ideal, it’s really only practical for B2C companies—B2B businesses will usually need to rely on other payment methods.
  • While still in use, cheques tend to result in lengthy AR processing times since it can take a while for payments to reach you (and subsequently, your bank) by snail mail.
  • Credit cards offer an easy way for companies to pay smaller bills—and a relatively speedy internal approval process, which can result in faster payments to you. You’ll need to be wary, however, of processing fees that can hurt your bottom line, and credit card limits that won’t accommodate larger invoice amounts.

Using pre-authorized debits as a small business payment method has been gaining in popularity. Not only do PADs usually cost less per transaction than most credit card payments, they can be managed quickly and electronically with the help of a tool like Rotessa.

Rather than waiting for a client to pay your invoice, for example, you can schedule a date for the funds to be automatically withdrawn from their bank account.

At Enkel, we usually recommend clients save time on customer follow-up and collections by including an option on their invoices for customers to pay using Rotessa’s pre-authorized debit.

Best practice #4: Follow up on outstanding invoices regularly

Following up on outstanding invoices on a regular basis can be time-consuming – but keeping your accounts receivable in check is the only way to ensure invoices get paid and your cash flow stays positive.

There are many reasons why an invoice might not get paid on time:

  • It may have been directed to a billing contact who no longer works at that company
  • It could get overlooked, misplaced, or forgotten
  • Your client might delay payment because of their own cash flow issues

If you feel uncomfortable following up with customers, you could partially automate this process by having payment reminders sent out a few days before, and a few days after invoices are due. That way, you can limit your follow-up calls to just those invoices that are actually outstanding.

As an alternative, you might consider outsourcing your accounts receivable workflow altogether.

Not only is this a great way to ensure follow-ups are done consistently and in a timely fashion, as a busy business owner, but you also won’t have to worry about neglecting this crucial component of your cash flow management.