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Accounts Receivable: How to Optimize it for Small Business Growth

By October 24, 2019November 22nd, 2023No Comments

Although a technical accounting term, many (if not all) of us have received accounts receivable at some point in our lives. Ever received a paycheck from your high school serving job or dog walking gig? Then you’ve used accounts receivable.

When it comes to your business finances, you accounts receivable is critical: it ultimately affects your cash flow, which by now, we’ve hopefully drilled into your heads the importance of.

Related: Managing Small Business Cash Flow Without Spreadsheets

If you’re a small business owner looking for a simplified understanding of accounts receivables and how to optimize it for business growth, then read on ahead.

Accounts Receivable: How to Optimize it for Small Business Growth

Accounts receivable shape your working capital

Accounts receivable (aka money “in waiting”) is still money that’s yours, but just not yet. Because it’s coming in slowly, monitoring your paid vs. unpaid invoices and its payments regularly is key to improving your working capital.

From company policies to organizational culture, how you manage your accounts receivable directly affects how much working capital you truly have. Remember, working capital is a measure of your business’ liquidity and operational efficiency. Healthy working capital means that the current assets of your business exceed its current liabilities.

So how can I get my accounts receivable working in my favour? 

Set Payment Terms

Typically, accounts receivable can have different payment terms and cycles. The typical payment cycle for goods and services ranges between 30 to 90 days. As a business owner, it is your duty to negotiate the payment terms you want in a contract right from the beginning. Avoid the risk of not following up with your customers in a timely manner. Payments that are past due need to be addressed to reduce the bottleneck in your cash flow.

Make Payment Easy

Payment technologies have come a long way since the days of writing checks. Make payment easy and accessible for your customers using the right software. By using Kashoo, you can send a payment option directly with the digital invoice, prompting customers to pay with their credit card. Most of us see a task and save it for later. However, a prompt to pay will get your clients paying in no time!

Conclusion: Get your cash off the balance sheet

Accounts receivable on a balance sheet is, technically, an asset. It’s money guaranteed and obligated by law to be paid to you. However, it’s just as important to see the bigger picture of your finances to ensure that you’re not overriding your company’s credit limits simply because you’re not in-tune with the finances of your business.

What’s the best way to get a complete and accurate overview of your small business finances? With Kashoo! Kashoo makes it easy to track your income and expenses, unpaid bills and invoices, and even bank accounts and sales taxes—making it the perfect tool for staying on top of your finances. Try Kashoo free today!

Stay on top of your bookkeeping with Kashoo
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