6 Common Accounts Receivable Issues and How to Improve Them

1. Delayed Invoicing

Issue: Untimely invoicing results in delayed payments leading to a disruption in cash flow necessary for conducting business

Solution: Streamline processes, automate timely and accurate billing, where possible to boost efficiency, and simplify approvals to minimize delays to align with project milestones and contract terms.

2. Discrepancies in Billing

Issue: Billing discrepancies often result in disputes with clients, impacting relationships and delaying payments which in turn affect cash flow

Solution: Use project management software integrated with accounting systems to track every project expense accurately and generate precise invoices. Establish clear payment terms and expectations up front and ensure your system is set up to follow those.

3. Monitoring and Follow-up

Issue: Accounts receivable aging

Solution: Implement automated reminders and follow-up schedules to ensure timely payment from clients, along with tools to monitor like the ‘aging report’ example below.

4. Credit Risks

Issue: Extending credit without adequate risk assessment can lead to bad debts and financial instability

Solution: Develop a robust credit assessment framework and regularly review clients’ creditworthiness before extending terms.

5. Inaccurate Revenue Recognition

Issue: Revenue misrecognized due to incorrect tracking of project milestones can distort financial reports.

Solution: Leverage Earned Value Analysis (EVA) and ensure accurate revenue tracking against project progress stages.

6. Manual Reconciliation

Issue: Manual reconciliation of payments causing delays in financial reporting and increases error risks.

Solution: Utilize integrated accounting software that automates reconciliation processes, ensuring accurate and timely financial statements

Need Help?

There are a host of automated solutions and new technologies that will simplify your accounts receivable functions while reducing errors and improving cashflow. If you have questions or wish to discuss your current challenges and where we might help, reach out to info@thepoiriergroup.com and reference this article.