What Is Receivable Management Services?

What Is Receivable Management Services?

Your cash flow is your company’s backbone. Unfortunately, late payments and overdue invoices can be disruptive, which is why receivable management services are essential. As a debt collection agency, we understand RMS and what to do when you aren’t receiving the payments you deserve.

Below, we cover everything you need to know about RMS, including the definition of accounts receivable management, why receivable management services are necessary, how to prioritize collecting receivables, best practices and policies for accounts receivable management, problems of outsourcing RMS, and KPIs to track.

What Is Accounts Receivable Management?

Your company’s outstanding invoices, or the money customers owe your business, is accounts receivable. The accounts receivable management process involves handling the transaction from purchase to payment. It includes:

  • Invoicing
  • Debt collection
  • Credit onboarding
  • Cash reconciliation
  • Deduction management

Sometimes, customers don’t stick to your payment terms or pay their invoices promptly. For example, a customer may owe accounts receivable if they purchase a product from a vendor via a payment plan or business credit. If this occurs, your accounting team must dedicate time to chasing payments. That’s why so many businesses outsource the collection process to a debt collector.

Why Are Receivable Management Services Necessary?

When you need a third party to handle your company’s accounts receivable management and debt collection process, you should partner with a firm that offers RMS. By implementing an efficient strategy for accounts receivable management or outsourcing to a third party, your business can enjoy various benefits, such as:

  • Making your unpaid invoices manageable
  • Becoming less vulnerable to cash flow problems
  • Improving your odds of getting paid on time

How to Prioritize Collecting Receivables

Your accounts receivable management process shows you who owes your business money and the amount due. However, your accounts receivable management may not detail how or why these invoices are past due. To get the money your clients owe you, you should understand how to best prioritize collections and why accounts are overdue.

How to Prioritize Collecting Receivables

We recommend prioritizing collecting receivables by risk rather than by the outstanding amount. If you have additional data insights from a third-party data provider, we recommend leveraging these, too. With a risk-based, data-driven collections prioritization process, you can identify which accounts are more and less likely to pay. This process can help your staff avoid wasting time attempting to collect long-overdue payments.

Best Practices and Policies for the Accounts Receivable Management Process

Once you identify the customers with outstanding invoices and know how to prioritize collecting receivables, you should determine how to get the payments owed to your business. With a consistent collections policy, your business can streamline the process and improve your odds of success.

The best practices and policies for your company’s accounts receivable management process include the following.

  • Sending invoices promptly: Your business should send invoices on time so customers know their payment due dates. Setting up an automated email invoice can be incredibly helpful. Customers automatically get emails before their due date and on their due date, so there is more than one reminder about the payment. Automation will also save your staff valuable time. These templated emails should include attached invoices and account statements.
  • Monitoring accounts that are slow to pay: Monitor customers who tend not to pay on time. First, address any internal errors, such as deductions, price discrepancies, and billing mistakes. Then, send past-due notices. A slow-paying customer may require more personalized treatment, such as phone calls, contact with a sales representative, and written letters. These steps can help you collect overdue payments.
  • Making it easy for customers to submit payments: When you remind your customers about their payment due dates, you should also include a convenient way for them to pay you online. Constantly waiting for checks to arrive in the mail will disrupt your cash flow. Though some B2B companies continue to mail paper checks, more are transitioning to digital payments. Be sure to offer a way for customers to make payments via credit card or bank account.
  • Outsourcing your accounts receivable management process: One of the best steps you can take to streamline your accounts receivable management process is to outsource your needs to a commercial debt collections agency like Altus. When you partner with us, we can help you get the payments people owe you.

Read some tips on making collection phone calls here.

Issues With Outsourcing Your Receivable Management Services

Some businesses hesitate to outsource their accounts receivable to a third party because there are some potential issues with doing so.

  • Belligerent debt collectors: Some debt collectors can be rude or unpleasant to deal with, which could lead to dissatisfied customers who choose not to purchase from your business again.
  • Risk of negative impact on brand reputation: If you outsource your debt collection to unfriendly collectors, it could adversely affect your brand’s reputation.

As a result, some companies choose to handle their receivable management process themselves. However, there are many advantages to outsourcing, especially when you partner with a reliable debt collection agency like Altus. At Altus, we offer first-party services that allow us to uphold your brand reputation and standards. Though it’s up to you whether you outsource your accounts receivable to a third party, receivable management services are essential for any business.

Learn tips on choosing a collection firm.

KPIs to Track for Your Company’s Accounts Receivable

To ensure your efforts for accounts receivable management are successful, you should understand how to measure and track the effectiveness of the process with key performance indicators. Many accounts receivable teams use the following metrics.

  • Collection effectiveness index: CEI demonstrates the success of your company’s collection efforts over time.
  • Accounts receivable turnover ratio: This accounting formula measures how efficiently your business is collecting debt and extending credit. This formula involves adding together your average accounts receivable and net credit sales.
  • Days sales outstanding: DSO demonstrates how much time it takes, on average, to convert accounts receivables into cash. Use this KPI to determine whether you need to make a change in accounts receivable management. Learn more about increasing your cash flow.

Call Us at Altus for Receivable Management Collections

Call Us at Altus for Receivable Management Collections

At Altus, we are a commercial debt collection and accounts receivable firm. We work on behalf of businesses like yours to retrieve debt from customers and clients. We can help your business achieve its objectives, and you can trust us to customize our approach to your business’ specific needs. We’ve been providing our services since 1994, so we have expertise in numerous industries, including:

Whether you need first-party commercial collections, third-party commercial collections, or legal forwarding services, you can contact us at Altus for more information about our services.