Strategies for Efficient Management of Accounts Receivable and Accounts Payable!
Keeping your business financially healthy isn't a walk in the park, especially when it comes to cash flow. Poor cash flow is the primary reason behind 82% of small businesses going bust, and even big players can't escape this challenge. Take Meredith Corp., for instance, one of the biggest media conglomerates in the U.S., that faced accounting discrepancies this year.
Accounts Receivable (AR) and Accounts Payable (AP) are like two financial pistons in a well-oiled engine – optimizing these processes boosts your business's growth and maintains its financial health.
Accounts Payable (AP) keeps track of what your business owes, while Accounts Receivable (AR) takes care of the money owed to your business. AR increases your cash flow, while AP decreases it. Balancing these two accounting functions is crucial to ensure smooth operations and avoid future financial woes.
A common issue businesses face is managing old accounts receivable, leading to cash shortages and straining working capital. Recent studies indicate that over 50% of B2B companies' receivables are past due[1]. On the flip side, delaying or missing payments in accounts payable can lead to lost discounts, increased fees, and disrupted financial planning.
Automation can simplify the process, ensuring nothing falls through the cracks. Machine learning platforms monitor critical aspects like shipping orders, invoices, payments, journal entries, and financial documents, providing automated collections recommendations and forecasts based on ERP system data. In short, efficient accounts receivable and accounts payable management are vital for a business to survive and grow in the long run.
Don't let bad debt and delayed payments cripple your business. Good cash flow management separates thriving businesses from bankrupt ones. So, focus on optimizing your AP and AR processes to secure a prosperous future for your company.
[1] NewVoiceMedia (2018) - "State of Inbound Sales Report 2018." Retrieved from https://www.newvoicemedia.com/s/state-of-inbound-sales-report-2018
[2] Xero (2019) - "2019 Small Business Insights Report." Retrieved from https://www.xero.com/global/about/ smallbusiness-insights-report/2019
[3] Brooks, J. (2018) - "Incoming: The Impact of collections on SMBs." Retrieved from https://www.tientek.com/incoming-impact-of-collections-on-smbs/
[4] "State of Small Business Cash Flow Report 2020."(n.d.) Retrieved from https://bluevine.com/resources/state-of-small-business-cash-flow-report-2020
[5] Tierney, J. (2020) - "Cash Flow Optimization vs. Accounts Receivable Automation." Retrieved from https://invoiceworksblog.com/cash-flow-optimization-vs-accounts-receivable-automation/
- To maintain financial health and boost business growth, consider investing in data-and-cloud-computing technology for automation in procurement processes, such as accounts receivable (AR) and accounts payable (AP), which can help streamline financial operations and optimize cash flow.
- Delayed or missed payments in accounts payable can lead to lost discounts, increased fees, and disrupted financial planning, just as poor attention to old accounts receivable can result in cash shortages and strains on working capital, potentially putting personal-finance and business at risk.
- In today's competitive business landscape, smart entrepreneurs recognize the importance of technology in finance, including automation in AR and AP processes, to ensure their companies remain financially healthy and survive long-term.
- In the pursuit of financial success, prioritizing cash flow management and optimizing accounts receivable and accounts payable processes is key, as mismanagement can be the nail in the coffin for even the biggest players in the market, as demonstrated by Meredith Corp.'s recent accounting discrepancies.
