How to Manage Customer Payments

Your guide to Accounts Receivable 👇 Ever wondered what REALLY happens when a customer owes you money? Let's dive deep into Accounts Receivable (AR) - the lifeline of your business's cash flow. ➡️ WHAT IS ACCOUNTS RECEIVABLE? Simply put, it's money customers owe you for goods or services they purchased on credit. But here's what most people don't realize... While you might have amounts owed by banks or owners (those go into different accounts like notes receivable), AR is specifically for customer balances. Don't confuse this with Accounts Payable - that's when YOU owe money to others. Remember: - You send INVOICES to customers - You receive BILLS from vendors ➡️ WHY AR MATTERS? 💸 Direct Cash Flow → Your receivables convert straight to cash, unlike inventory that just sits there 💰 Cash Flow Impact → Long collection cycles can absolutely destroy your working capital ⚠️ Risk Management → Large AR balances mean increased bad debt risk (I've seen this sink businesses!) 📝 Customer Terms → While customers need flexible terms, you need a robust system to manage them 📈 Growth & Stability → Efficient AR management is what fuels your business expansion ➡️ THE ACCOUNTING BEHIND AR Here's where the magic happens (and yes, accounting can be magical! 😉) When you issue an invoice: - Debit Accounts Receivable - Credit Revenue When you finally get paid: - Debit Cash - Credit Accounts Receivable ➡️ TECHNOLOGY IS YOUR FRIEND Stop doing this manually! Here's what modern AR software can do for you: - Automated invoicing - Real-time payment tracking - Built-in reminders - Integration with your accounting system ➡️ PROVEN STRATEGIES THAT WORK 🤝 Friendly Approaches (Try These First!): - Request payment upfront whenever possible - Collect credit card/banking details for autodebit - Follow up consistently (trust me, the squeaky wheel gets paid!) - Request credit references before extending terms - Offer early payment discounts (like 3/7 net 30) ❌ When Friendly Doesn't Work: - Stop service if payment isn't collected (just like your electric company!) - Send the account to collections (yes, you'll get less, but something is better than nothing) - Take legal action (last resort, but sometimes necessary) ➡️ CRUCIAL METRICS TO TRACK These are the numbers you NEED to watch: 📊 Days Sales Outstanding (DSO) Formula: (AR / Net Credit Sales) * Number of days Lower is better - it shows how quickly you're collecting! 📈 AR Turnover Ratio Formula: Net Credit Sales / Average AR Higher is better - shows how many times you convert AR to cash 📉 Bad Debt Expense Ratio Formula: Bad Debt Expense / Total Credit Sales Lower is better - shows how much you're losing to bad debt === The way you handle AR can literally make or break your cash flow. I've seen businesses transform their entire financial position just by getting better at managing their receivables. What's your biggest AR challenge? Let me know in the comments below 👇

Your team works hard to deliver exceptional value to your clients. But when the payment deadline arrives, THEY GHOST YOU. No follow-up from their side. No money in your account. Now you’re left juggling emails, reminders, and calls instead of focusing on growing your business. ~~ This is why Accounts Receivable management is crucial. When businesses don’t prioritize efficient AR practices, they face: -> Cash flow disruptions:  Expenses keep piling up, but revenue is delayed. -> Strained client relationships:  Constant follow-ups can create tension. -> Lost opportunities:  You can’t invest in growth if your income is stuck in limbo. ~~ So, what’s the solution? Here are practical steps to improve your Accounts Receivable process: ~~ 1/ Set clear payment terms:  Every invoice should state precise deadlines like “Net 15” or “Net 30.” 2/ Leverage technology:  Use AR automation tools to track invoices and send reminders. 3/ Enforce penalties:  Late fees can encourage on-time payments without damaging relationships. 4/ Follow up consistently:  A professional follow-up process shows you mean business. Efficient Accounts Receivable management isn’t just about collecting payments. It’s about building trust, ensuring smooth cash flow, and giving your business the stability to thrive. ~~ How are you currently managing your Accounts Receivable? Need help with accounting tasks? DM ASSIST and I’ll get back to you! #accountsreceivable  #finance  #businessandaccounting

You think you’re profitable…  But your bank account tells a different story. Managing cash flow can feel like a constant puzzle. Late client payments strain your resources, while vendor bills pile up, adding to the pressure. As a result, your business decisions slow down, and growth opportunities slip away. The constant worry about cash impacts your leadership, while delayed supplier payments damage relationships and late fees continue to eat into your profits. But you don’t need to worry more! You can fix this and master your cash flow. By two strategies: 1. Accounts Receivable Strategy: - Send invoices immediately after service - Offer early payment discounts - Set clear payment terms - Follow up consistently - Use digital payment options 2. Accounts Payable Management: - Negotiate favourable payment terms - Track due dates systematically - Take advantage of early payment discounts - Maintain vendor relationships - Plan payment schedules Think of accounts receivable as your accelerator and accounts payable as your brake. Balance them well, and your business runs smoothly. You'll transform from constantly checking bank balances to confidently making business decisions. #accountsreceivable  #accountspayable  #finance  

A lot of CFOs will try to fix your cash flow problems on the back end by selling you cash flow forecasting services. Like a chiropractor, they’ll keep you coming back for maintenance, but they never actually fix the underlying problem. While there are some business models that require a lot of “cash maintenance”, for many businesses, cash challenges can simply be fixed by addressing the problem on the front end. By automating the way you get paid. Imagine this…. 1. Proposal is electronically signed by customer  2. Customer is taken to a landing page to provide their ACH or Credit Card authorization 3. Invoices are pushed into accounting software for approval  4. Once invoice is approved, the payment is automatically processed (money PULLED from customer's bank account or credit card charged) 5. Upon payment, the invoice is automatically closed out and AR aging is updated  6. The accounting software creates a transaction and automatically matches the bank transaction for reconciliation  7. Bookkeeper verifies accuracy of reconciliation Now that is a beautiful workflow with minimal manual steps. The result? -No more writing off bad debt  -No more delayed projects  -No more chasing customers for payment  -No more stressing out about not making payroll -No more not being able to take profit distributions  -No need to spend money on receivables admin or cash flow forecasting Curious to know what apps we recommend to use in this workflow? Check out the latest episode of Cash Flow Show - Getting Paid. (link in comments) Scotty Scarano 🥶❤️🔥 Accounting High Momentum Accounting, Inc.