Customer Management – Steps involved

Receivable accounts or the AR process are key to receiving payments from customers. Businesses use it to manage the cash inflow and their collection process for the goods or services they have already sold.

To be able to handle AR effectively, it is important that your finance and accounting team knows the keys to managing each step effectively. They must also be able to collect payments on time and innovate and develop the latest strategies. They also need to be positive when it comes to best practices to maximize their cash flow. In addition, they must have a thorough knowledge of all aspects of AR, cash management, contact management, debt collection and credit management in order to function in a holistic way.

According to some research results, receivables make up 2/5 to 1/3 of the total balance sheet, and yet most companies do not end up managing this process effectively. Risk management is often disproportionate, even if it significantly affects the bottom line in all companies regardless of their segment, domain or other factors.

The AR processes are actually important because they affect the overall cash flow of the company. Furthermore, they can also become a bottleneck for the entire bookkeeping and ledger processes. So it is often preferred that a company constantly monitors.

The process has several steps such as:

  • credit Decisions
  • Invoicing and Invoice Distribution
  • Receipt, awards and ballots
  • collections
  • dispute Management
  • Bad debt

credit Decisions – This step includes checking if the potential customer has a sufficient credit rating to get the products or services provided to him during an account business.

Invoice distribution and invoicing – This happens after the services / goods are delivered to the client. The customer usually completes the payment when the invoice is generated, but sometimes they also pay when they are ready.

Receipt, awards and ballots – This step is handled by an AR Officer. They identify a payment deposited into the vendor’s bank account. Then they receive it into the system and assign the payment to the relevant invoice. After that, the vote is to make sure it is a correct payment.

collections – All unpaid or short-paid invoices are identified by the Debt Manager on a given date. This may also include sending reminders to the customer and receiving the payments when and when, or according to the company / business policy.

dispute Management – This step is typically managed between collection manager and customer if clients / customers dispute an invoice or invoice. However, in some companies (largely B2C models), there may be dedicated dispute management teams.

Wrong debt – Any debt is met for a specified time frame or date. If a debt goes beyond that debt and / or is disputed and no mutual solution has been agreed (to the satisfaction of the supplier), bad ones are put into the bad debt category.