Why Accounts Receivable Management is Important for Business
There are plenty of aspects that help a business grow. From having a great website to building facilities in key locations there is a near endless amount of things a company can do to establish itself in the present market. For companies that sell higher priced services, like law firms, it can often be difficult to establish themselves and thrive in regions or areas they would prefer. That’s where a good ‘Pay as you go’ model and accounts receivable team comes into play.
What Is Accounts Receivable?
Accounts receivable is the team or group within a company that uphold the policies and practices of managing sales offered on credit set by that company. For instance, a company that sells electronics may offer financing or a line of credit on their higher priced products like televisions or sound systems. The group in that company who establishes the credit and bills the customer every month would be the accounts receivable team. They oversee the credit process from start to finish as well as create and update rules and regulations along the way. The overseeing of these rules and regulations set forth by the company is called accounts receivable management. For law firms that offer sales on credit, a knowledgeable and hardworking accounts receivable team is integral, and to have one put in place long before any credit is used will not only save your firm money but headaches as well.
Why Firms Use Sales On Credit
Most of the time, offering sales on credit is beneficial for both parties involved. Not only does the customer get the legal services they need right then and there, but they get to pay off the services in small, manageable monthly payments. The client also gets to build credit, making it even easier for them to open new lines of credit in the future. The firm that offers the line of credit also benefits as they get to sell their legal services as well as charge a small amount of interest on the provided service, making the firm more money in the process.
How Sales On Credit Can Hurt Businesses
When a company or firm offers sales on credit, they must first make sure the customer is worthy of extending a line of credit towards. Companies sometimes extend credit to people who are risky or unreliable with their credit. Some of these people default on their debt because they can’t or don’t pay back the debt they’ve taken out. This costs businesses a lot of money, especially ones that don’t have an experienced or established accounts receivable division, as they try to work out getting their money back. If a company takes on too many of these negative accounts, and can’t re-acquire funds, they can be forced into bankruptcy.
How Inside Accounts Receivable Management Can Hurt
If your firm doesn’t have an accounts receivable management team already in place, the process can be expensive and time consuming. Rules and regulations will first have to be established, such as who to extend credit to or not, when to contact clients about late payments or when to exit a contract with a client. If your firm already has an accounts receivable team, and they aren’t experienced or have outdated policies, they could be costing the company money.
How Outside Accounts Receivable Management Can Help
If none already exist, the accounts receivable team will put strict rules and regulations in place before any credit is extended, making sure there is a solid foundation from the beginning. Accounts receivable teams will also make sure that the person the company is extending credit to is reliable with thorough credit checks, ensuring if they aren’t reliable debtors, they won’t get a line of credit. Any and all existing clients’ credit lines will be handled by the offsite team, taking heavy work off of your firm’s plate.
They’ll also maintain client relations throughout the life of the credit. This means that the team will work with the client the entire time they’re paying off their debt. They will make sure the customer pays on a consistent and timely manner, answer any and all questions the client presents and help resolve any issues that may have occurred from either side along the way. These services allow your firm to operate normally without interference from the planning process or clients while also gaining the benefits of establishing sales on credit all while saving time and money with an experience accounts receivable management team.