Business Advice
Understanding Accounts Receivable and How it Impacts Your Business
Are you receiving money owed to you by clients on time, and how can your business improve on its accounts receivable processes?
Accounts Receivable
With an effective strategy, you can ensure that your business receives money from clients on time, every time.
Accounts receivable (AR) refers to payments your business receives from customers in exchange for goods or services purchased on credit. It differs from accounts payable (AP), which handles the money your business owes to suppliers and creditors.
AR management isn’t just about determining a suitable credit period; it’s an important part of ensuring a steady cash flow, which is vital for business success.
Our expert team of outsourced bookkeepers and accountants can improve your accounts receivable processes. We can help you manage transactions to help you improve turnover, lower your accounts receivable turnover ratio, and improve profitability. This gives you access to a collaborative ecosystem that supports the evolution of your financial processes.
Whether it’s a quick consultation or a longer-term project, we can assist you with:
- Implementing effective AR systems
- Software integration and support
- Capacity and skills training
Tailored Pricing Plans to Match Your Business
Fusion CPA is an outstanding resource for outsourced financial service needs. Whether it's bookkeeping, reporting, clean-up, compliance, tax planning or strategic business planning, Fusion CPA has always been a tremendous resource for me and my clients.
Why accounts receivable turnover is important
Accounts receivable turnover (ART) is often called the debtor’s turnover ratio. This ratio tells you how effectively your company collects revenue, and indicates how well your business uses its assets over time.
Many businesses see ART as the defining metric to evaluate the effectiveness of accounts receivable processes. It’s also a useful tool for competitor analysis and benchmarking; by comparing your ART ratio with other firms in your industry, you can gain insight into how you are performing against your competition.
ART is calculated using the accounts receivable turnover formula.
Five Best Practices for Accounts Receivable Management
Establish payment policies:
Clearly communicate your payment terms to customers and implement clear AR collection policies about addressing overdue accounts.
Monitor your invoices:
Pay close attention to when invoices are sent and payments are due, while consistently matching customer payments to outstanding invoices.
Embrace automation:
Automating your billing and payment processes can help you keep track of AR, while saving you time and reducing the risk of human error.
Use the right KPIs:
Keep track of performance performance metrics like accounts receivable turnover (ART), days sales outstanding (DSO), and average days delinquent (ADD).
Regularly evaluate your processes:
Running reports will help you identify payment trends and customers who are frequently late. This can help you improve your processes and identify ways to streamline collections.
Following up on collections can be time-consuming. Thankfully, accounts receivable software can help you determine if you need to tighten credit or intensify your collection efforts.
This type of software applies unique formulas to your receivables collections to help you decide which customers are taking longer to pay. That way, you’ll know if you need to strengthen your policies for extending credit or collecting more vigorously.
If your accounting software isn’t up to the task, Fusion CPA can help you choose and integrate the best solution for your business. With over 20 years’ of experience in the industry, our team recommends these software options:
We recommend these comprehensive software options:
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Software Solutions
Manage Accounts Receivable and Accounts Payable Efficiently with QuickBooks Plus
Your accounts receivable and accounts payable processes ensure operational efficiency, constant cash flow, and serves as the basis upon which you can do cashflow forecasts to take your business to the next level.
Tax Planning and Accounting
Maintaining Clean Accounting Records
Clean accounting records help top-level management make swift decisions that can save your business time and money.
Our Services Can Scale With Your Business
At Fusion CPA, we offer a host of outsourced accounting services. Whether you need accounting, bookkeeping, or controller services, we can provide you with the perfect solution. Our accounting experts have years of experience and expertise across different industries.
