Four strategies to lower accounts receivable are as follows:
- Upfront Sales Terms and Conditions - a key factor in affecting the receivable balance is to make up front contracts to sales terms and conditions clearly understood. Have a standard policy/procedure and while leaving room for flexibility of negotiation, ensure clarity with the customer.
- Finance Team Cross Functional - ensure the finance team is highly involved in the operations and understands the barriers to efficient receipt of cash. A margin of the time a breakdown occurred in operation to slow down payment.
- Deliver customer requirements on-time - once we have committed to a contract it is key that all deliverables are on time. The delay on the firm's delivery will be reciprocated with payment timing.
- Quality Product - a key to ensuring efficient collection of cash is the quality of the product. A poor quality will significantly delay payment and may put a customer at risk.