Texas Accounts Receivable Management

Written by Patricia Tunstall
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Any business must extend credit to attract customers, and yet, accounts receivable detract from the cash flow needed for immediate operations. This quandary represents a balancing act that business owners must approach with diligence, that is, with daily, weekly, or monthly reports from the accounting department. Strict, explicit policies must be in place within the company to manage accounts receivable so they do not encroach unnecessarily on cash flow.

Controlling Accounts Receivable

Part of the difficulty of managing accounts receivable is that it isn't just dealing with paper, but real people--your customers. These are the debtors to whom you have extended credit in order to obtain their business. If they are slow to pay, they impinge on your cash flow. Even if they all pay on time--which is highly unlikely--terms of 30, 45, 60, and even 90 days tie up the cash owed to you.

In the meantime, you have expenses to pay, payroll to meet, and inventory to purchase. The smaller your business, the less you can afford to carry these customers because you operate on such a slim margin. Before accounts receivable start controlling your business instead of the other way around, there are some policies you can put in place that will help with your accounts receivable management.

Lay out clear policies for extending credit, and ensure they are understood and followed by all involved employees. As tempting as it might be just to take any customer and offer credit, look into the customer's credit history. Set up credit limits for each customer based on this history, and do not waver. Consider charging certain penalties on overdue accounts, and accepting credit cards for payment. Above all, don't let debts get too large or too overdue.

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