Business Finance

5 Tips for Small Business Accounts Receivable Management

Effective cash flow management is one of the important measures for a business to succeed. 

To enable prompt payment to employees, suppliers, and other parties, your business needs to maintain a smooth and consistent cash flow to enhance its viability.

Accounts receivable are part of business activities that need specific attention because it is important to every business operation. 

The procedure might be difficult because not all businesses are successful in getting paid for the goods and services they provide. This results in a reduction in cash flow and increases the level of account receivables.

Accounts receivable cannot be predictable but ensuring due payments as soon as feasible is the best solution.

Analyzing accounts receivable gives quick access to determine the business profitability and other revenue.

This article will explain what account receivables are and the tips for small business accounts receivable.

What Is Account Receivable?

Account receivables refer to the money owed to a business for goods or services purchased by the customer which has not been paid for. They are recorded as current assets on the balance sheet.

What Is Account Receivable Management?

Account receivable management referred to several established policies and practices for managing accounts receivable. 

This helps to ensure prompt payment and payment credited in full to the right accounts.

The debt could be given to a collection agency if the buyer refuses to pay and the collection process will be started by the agency.

But the business is likely to suffer a loss if it gets to the extent of employing a collection agency if they are on a tight budget and depend on the customer debt. This is why it is very important to manage accounts receivable under your control.

Tips For Small Business Accounts Receivable Management

1. Know Your Customers

The most important part of tips for small business accounts receivables management is to get to know your customers. 

It is necessary to have accurate records and to be aware of the appropriate legal organization that represents your customer. 

If the details have been provided by the debtors at the very least and ABN that will help to determine the sole trader, company, partnership or individual you are bargaining with.

You can assume if the customer will be a delayed payer or if they have any unpaid debt on the business references that are supplied on the credit application which could help you avoid writing bad debt.

2. Settlement Or Payment Plans

If you’re aware that customers might be unable to pay by the due date, the best option is to choose a payment plan that is acceptable to both parties.

It is preferable to get paid in full, even if it takes three months because there is a possibility of not being paid at all. Another option that will enhance cash flow is to offer a discount on the settlement price to customers who pay before the due date. 

This is predicated on the belief that your profit margin permits the possibility of a settlement discount.

3. Automation Process

When it comes to small businesses and invoices, automating accounting processes is quite easier to monitor cash flow. 

There are various amazing software, management systems, and websites available for usage.

The system helps to process payments and keep track of transactions all in one location and fees are kept to a minimum, and there is less risk of generating a poor impression on suppliers. 

Even though tax season is unpleasant, using automated and online software programs for invoicing makes it easier to keep track of transactions, deductions, and other aspects of one’s finances. 

4. Managing Aged Trial Balance

It is quite necessary to have a clear awareness of your creditors, how much you are owed, and the date of the debt. 

A trial balance will provide a list of all of your outstanding creditors, the amount they owed, and the past due time to your terms of payment. 

This can help to decide if they need a friendly reminder, to keep supplying them, or to place the account on hold till the arrears are brought up to date.

5. Reduced Transaction Cycle

Customers and managers may become confused when long transaction and billing cycles are used, which may also cause problems with cash flow. 

Changing the transaction cycles can help increase cash flow at a healthy rate. 

The transaction cycles and dates that are used in financial accounting software can be shortened. 

You can create terms and dates of transactions as a business owner. When the transaction cycle takes more time to be completed, the customer due will be at a future date.

Other Topics on Receivables Management


The Source of revenue included the expected profit from transacting business with customers. Therefore, account receivables management has a direct influence on the business financial status.

No business would be negligent of its management and expected growth in the long run, and it is quite important to be aware of necessary tips for small business accounts receivable management.