How to optimize credit receivables/recoveries while ensuring good relationship with the clients?

There are five activities within the accounts receivable function that, if optimized, can help you free up cash and strengthen your working capital: 1. Customer credit approval First off, you need a process – clear and concise policies for issuing credit and recovering debt in a timely fashion. Todo this, you need to: • Set responsibilities. Solicit input from the sales team when setting policies to ensure market realities are reflected. • Determine when to assess credit limits. If a new customer is buying low volume items on short terms, a simple internal scorecard may be sufficient to assess theircreditworthiness. Conversely, if a new customer is interested in purchasing large volumes on a regular basis, you may need a more stringent process, such as full background and credit history checks. • Commit to approving or rejecting credit applications within a certain time period. • Regularly review the credit approval process. 2. Customer master data.Once you assign credit limits, payment terms, discounts, tax rates and return policies, and any other relevant terms (i.e. delivery address,e-mail address etc.) To get the most out of your data, you need to: • Centralize the master data process. • Conduct regular audits of master data to identify customers with abnormal credit limits, payment terms, and/or discount rates • Document and communicate all changes to customer data. • Implement controls to ensure data accuracy and permit read-only access to staff . 3. Invoicing/billing. You’d imagine that billing is fairly straightforward, but companies often struggle in this area. Some make consistent invoice errors regarding units of measure, price, customer accounts or other inaccurately reflected master data. Some fail to generate invoices in a timely fashion – or at all. Sometimes, team members make an end-run and bill outside the system. In other cases, companies bounce back and forth between mailed and electronic invoices,The key here is to establish a billing process that ensures accurate invoices are sent on a timely basis. To do this, organizations should consider the followingstrategies: • Automation: can reduce time and human error. • Timely/effective invoice generation and reporting: can ensure billing is completed in a timely basis and reports are relevant to the end-user. • Electronic billing systems: EDI/electronic invoices can reduce delivery time and allow customers to download their invoices directly into their own accounting system • Exception reports: can help to flag account anomalies (e.g.sales exceeding credit limits, discount rates above company policy, etc.) • Customer portal: can reduce manual hours dealing with cash applications, disputes, collections, et 4.Cash application process. Companies that get this wrong often waste considerable time and resources reissuing invoices and even amending reconciliation reports where their systems can’t “reverse” incorrect cash applications. To avoid this, you need to: • Allocate payments to specific invoices rather than simply crediting the customer account. • Apply payments to the appropriate invoices, not just the oldest invoices. • Apply payments to each account on the day they’re received, to maintain system accuracy. This can be complicated if the company accepts many different forms of payment, such as pre-authorized debit, cheques, wire transactions, electronic funds transfer or even payment over the phone. In these cases, it may make sense to limit the payment methods customers canuse. • Post journal entries well before system cut-off dates • Reconcile accounts on a timely basis by quickly and consistently following up on unidentified cash receipts rather than dumping them into suspense accounts and letting them languish. 5. Collection process Of course, before they can follow up on late payments, your staff members also need assurance that the accounts receivable reports are accurate as of today and that there aren’t days, or even weeks, worth of cash receipts that have not yet been applied to customer accounts. This requires a robust accounting process. Other ways to maximize collection of receivables include: • Engaging in frequent and consistent collection efforts. This includes bolstering staff skills if they lack knowledge on how to collect amounts owing from recalcitrant customers • Negotiating payment plans that align to corporate collection policies • Ensuring any discounts offered benefit the company and are implemented accurately • Strengthening processes to permit accurate reporting • Automating processes to avoid manual entry errors.

Gave discounts to customers who pay their bills quickly. Ask your customers with advance payment submit their applications. Ask him checks from customers for sales of non-cash so you can deposit it in the bank. To get rid of inventory, which is out of date old time as you can get it from money. Billing quickly and follow-up payments on the spot if they were slow. Accounts receivable continued path to identify and avoid customers slow payment. Put monetary policy on Delivery ( COD) is an alternative to refuse to do business with customers a slow and non-payment is committed to the dates of payment.

1) Bulk Discount

2) offering additional rewards/benefits for timely payments

3) better history entails longer reward for extending higher credit settlement period.