When you first set up a small business, you tend to be focused on very broad aspects of your brand and company. You’ll focus on product development, product design, market research, advertising, and marketing. This, of course, can be a steep learning curve and you’re bound to have to take on board a whole host of information to keep things ticking over and ensure that your business is producing products and services that people really want to invest in. However, don’t be fooled into thinking that you’ve got a grip of everything once you find your feet in these areas. As a business owner, you’re going to constantly be taking in more and more information about how to run your company and how to make a success of your brand. As you get to grips with bigger and broader areas, you’ll find yourself focusing on more niche and specific areas. Accounts receivable (otherwise referred to as “AR”) tend to be one of these niche areas that gets left until later down the line. But it’s important that you truly understand this subject area at some point or another. So, let’s take a look at a few key points when it comes to managing your AR effectively.
What Exactly Is AR?
Now, we’ve established that AR is “accounts receivable”. But what does this actually mean? Well, accounts receivable are outstanding invoices that have not yet been paid. If your business only accepts immediate payment for its goods or services, you are unlikely to have to deal with this area. However, there are plenty of benefits that come hand in hand with allowing customers and suppliers take out finance or buy-now-pay-later schemes. It can secure more sales and capitalize on impulse buying. It also offers your products out to a wider audience who may not have the funds for your goods immediately available, but are happy to pay you back in smaller installments over time. You can simplify this process by using an accounts receivable service.
Managing your accounts receivable is extremely important. If you fail to manage this area of your business effectively, you could find that people take your products and never end up paying you what is owed back – you could make loss after loss. If you’re not going to outsource this work, take the time to draw up separate accounts for different clients, suppliers, and customers, and make sure to mark off any payments that have been received – deducting this sum from their total owed and being able to issue a new final settlement figure. This is good for you, but is also good for individuals who owe you too. They will be able to check in and see how much they owe and they can manage their own finances and payments more effectively as a result.
Now, chances are that you might not have considered accounts receivable in all too much detail before. But hopefully, the above information has highlighted the importance of this area of your business and will help you to manage AR within your company more effectively moving forward!