Accounts receivable management services do much more than handle collections. By choosing an AR management partner that matches your needs, you can leverage their expertise to help your business grow.
What are Account Receivables?
Accounts payable refers to the expenses you must pay, such as wages, supplies, and utilities. Accounts receivable (AR) is the money you collect for the sales of your goods or services. These are recorded as part of your company assets and are what allow you to pay for those expenses.
What is A/R Management?
Collecting money owed is not always a straightforward task. At times, it involves invoicing and extending credit to customers. Once you start providing your goods or services on credit, you need to have a system to manage terms. Providing terms is more complicated than a business structure where payments are made during the purchase.
AR Management is tracking your invoices, ensuring timely payment, and managing this process in a thorough, organized, and professional manner. This will extend to collections for any customer who is not meeting their obligation to you. Some accounts receivables management companies can offer your business more services, such as checking creditworthiness or helping you to find non-bank financing solutions.
What Services Does A/R Management Include?
Outside AR management companies should be able to conform to your particular business structure easily. Depending on what your needs are, they should be able to:
- Tell you how much credit you can afford to extend to your customers.
- Provide you with AR financing options, such as factoring invoices.
- Evaluate the creditworthiness of your clients to determine how much (if any) credit can be extended to them.
- Improve your collections of unpaid invoices with a friendly, white-glove approach.
- Communicate effectively, not only with you but with your customers that they deal with.
- Assist you in obtaining funding for your company through non-bank financing methods.
With an AR management company, you should have the final say in how involved they are in your business. Some owners appreciate being able to hand over all the responsibilities of their AR division, while others prefer to maintain some control over the cash flow into the business.
What are the Benefits of Partnering with an A/R Management Team?
Allowing a third-party company to handle your AR management is beneficial to your business in a myriad of ways. Not only will it save you time, but it also allows you to focus on the production of your goods or execution of your services. Inevitably, this will help in improving your business.
Other benefits of working with a professional AR management company include:
- Improved cash-flow for your business. This could be through better collection services or the use of accounts receivable factoring. The AR management firm can enhance your eligibility for less expensive financing options like invoice factoring. It will enable you to have access to working capital at all times.
- It has enhanced productivity and services. With a steady flow of income, you can better serve your customers, which in turn increases your business and profits.
- Credit improvement. When your AR management is running smoothly, you can stay on top of your payables. You will also improve your credit rating and your chances of securing financing for expansion in the future.
- Financial protection. An AR management company can help you secure non-recourse financing, a method that protects your business from losses if a customer defaults on their invoice.
- It has decreased overhead costs. With an outside agency helping to manage your accounts receivables, you will be able to cut back on the expenses usually allocated to wages and other resources used by that division.
- Better organization. Accounts receivables management companies can track all of your business income. By centralizing this department, an organization becomes better, a benefit that will have great appreciation during the tax filing season.
Outsourcing back-office responsibilities like accounts receivable have been a growing trend for years. The most efficient way to take advantage of this option is by using an AR management company that not just offers collection services, but that can also find you funding through those unpaid invoices. By combining all of these needs, you will see your working capital running much more efficiently.