In order to ensure smooth operations of every business, it is important each and every aspect related to business functions properly. Some important aspects such as marketing, sales, accounting are an integral part of any business operation and play a major role in further developing and growing the business. Apart from these factors, the accounts receivable process is another important aspect that ensures the success of a business.

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What is Accounts Receivable System and How to
Optimize its Process?
In order to ensure smooth operations of every business, it is important each and every aspect
related to business functions properly. Some important aspects such as marketing, sales,
accounting are an integral part of any business operation and play a major role in further
developing and growing the business. Apart from these factors, the accounts receivable
process is another important aspect that ensures the success of a business.
Accounts receivables (A/R) simply means the amount a firm or an organization has to collect
from other businesses or services. The term 'accounts receivable collections process' refers to
the process of categorizing and collecting the finance for pending invoices. Due to this reason,
it is an important part of any business area.
With the absence of the A/R collections process, it becomes hard for a business to operate
and thrive effectively. With a good understanding of this subject, a business, whether small or
big, can open the doors of success despite heavy competition.
What Does Traditional Accounts Receivable Process Really
Mean?
Let us understand how this process works. A traditional accounts receivable process starts
once an individual purchases something (it can be a product or a service) and halts as soon
as the outstanding payment is achieved.
With the help of accounts receivable workflow, businesses can track each and every record
and debt collection in a step by step manner.
The collection process starts all over again when there's a purchase made by the customer.
Therefore, it can be said that the A/R collections method is more like a circular process rather
than a straightforward one.

2. As a result, repeat customers always remain a part of the collection process unless they wish
to stop purchasing from the business. However, this usually doesn't happen until years of
purchases have been made.
A sneak peek into A/R collections process flow:
1. Sales and delivery– In order to convert individuals into customers, it is important to
establish good communication with them regarding the businesses products or
services.
2. Invoice– After purchasing the products, an invoice is sent to the customer, which
highlights the product details and the amount that has to be paid.
3. Payment collection– Customers usually have a time period of 30 days to pay for the
purchased product.
4. Reconciliation– Once the payment has been made by the customer, the entire process
starts all over again.
Extra steps also include:
Sending payment reminders to the customers in the middle of the month
Sending reminders at a later-stage
Taking the matter forward in case the customer fails to make the payment. This is usually
common with repeat customers, and more specifically, with those who have bought a
range of products. These customers have several invoices under process.
How to Make Accounts Receivable Management System
Better?
Anyone can understand the process of accounts receivable collections. After all, it isn't that
hard to understand, especially for a business. However, using that information to create a
unique procedure for your own business is a completely different thing.
Here are some tips that can help you optimize your accounts receivable collections process:

3.
1. Create a Database
If you are still using the older style of using pen and paper to run your system, ditch it
immediately. The first step to improve your collections process is to make the entire process
digital and create a database.
With the presence of modern technology, automated software offers various kinds of tools that
can easily increase any businesses potential of the collection while also reducing the number
of mistakes in terms of accounting.
2. Establish a Standard Aging Process
Businesses usually want their customers to clear off the pending payment within a span of 30
days, but there are instances where this may not always happen, and you'll have to provide an
extended time period to your customers.
To tackle this problem, it is advised that you create a list of the time an invoice remains
outstanding. Common timeframes include 0-30 days, 31-60 days, 61-90 days and 90+ days.
Depending upon the timeframe, you'll know which strategies to use in order to receive the
collection. With proper segmentation in place, the A/R team knows which reminders to send
and how.
3. Give Priority to Valuable Accounts
The success of accounts receivable is dependent on only one factor, i.e. reliable flow of cash.
Therefore, make sure that you focus on those invoices that are the reason behind your high
outstanding.
However, this doesn't mean that you shouldn't focus on other invoices. It's all that some
particular invoices need special attention at times than others.
Conclusion

4. You don't necessarily have to spend huge amounts in order to optimize your accounts
receivable management system. You can simply start with an automation platform that can
significantly contribute to the success of your system.