Accounts payable and receivable: 6 tips for your company to have control over its finances

In this article, we will show you 6 good practices to manage accounts payable and receivable to guide you to handle your company’s finances really well. So keep reading and be up to date on the matter!

1. Register cash flow

This leads to the first step to efficient account management: creating a cash flow routine whereby all cash inflows and outflows are immediately recorded after their incidence. It helps to understand the evolution of the cash flow and makes planning of working capital more accurate.

Keep tight control of your cash flow and don’t neglect your records. Remember that small mistakes, when combined with other small errors, can result in a serious financial crisis.

However, a common mistake is to use old spreadsheets to calculate cash flow . In addition to not being flexible, they also leave a lot to be desired when it comes to information security . If there is an error in a formula or macro, the calculations will be altered, causing errors that can cause serious problems for your business. Another risk of using spreadsheets is the possibility of data loss.

For this reason, it is best to have good financial management software . Using an online system to manage your company’s finances, your data will be secure and can be accessed wherever and whenever you want.

2. Make it easy to pay in advance

If you work with installment sales , a good strategy to improve collection rates is to offer benefits to those who pay in cash or before the due date. By granting discounts, reductions in the amount or other advantages to those who pay in advance , the company reduces the occurrence of delays, reduces the risk of default and encourages the customer to stay up to date with their debts .

Anticipating payments can also benefit your cash flow , as the company will receive the amount it is entitled to before the expected time . This ensures more working capital .

By facilitating advance payment , you build customer loyalty and create a competitive edge , since your competitors don’t have this type of strategy . Customers will come back more often, feel confident about buying from your brand, and may even be willing to pay a little more for your products or services — which will have a positive impact on your company’s revenue.

3. Monitor the company’s liquidity ratio

There are a number of performance indicators that can provide a more complete view of your business , as well as increasing your control over your company’s finances . Contrary to what many people believe, it is easy to measure these indicators , as long as you have the right data at hand.

A great indicator is the liquidity ratio , which relates the company’s short-term assets (everything that is receivable) to its liabilities (the amount that is payable). To use it, simply apply the following formula:

liquidity = short-term assets / short-term liabilities.

If the final result is equal to or greater than 1 point , it means that the company has good liquidity and that there is an adequate proportion between assets and liabilities. If the ratio is lower than this value, it is a sign that it is low and that the manager needs to generate revenue and eliminate debts .

4. Avoid late payments

Before resorting to credit to finance its activities , the company must bear in mind its real payment capacity . Consider here its monthly turnover , its income, its expenses and all the budget planning .

When taking on debt , it is also important to plan to pay it on time . To do this, make a financial plan and establish a schedule that aligns the payment of outstanding debts with your cash availability.

The important thing here is to prioritize commitments with the highest interest rates and the largest amounts. By honoring its obligations without missing the deadline, the company avoids wasting money and preserves its reputation in the credit market.

5. Renegotiate your debts

If the situation is not favorable for your business, try to renegotiate the amount that the company owes . Report your situation to the creditor and propose alternatives that show that you are really interested in paying off the debt . Make suggestions such as reducing the interest charged, increasing the number of installments or reducing the amount owed.

And be careful: don’t accept any proposal from the creditor without thinking it through! It’s important to close the deal only when you’re sure that the new conditions fit within your company’s budget , as you’ll be taking on a new commitment.

When you make a deal, do your best to fulfill it: this will ensure the trust of your creditors and prevent your company from getting into even more trouble.

6. Create a financial plan

A good financial plan helps you understand “where” you want to go and “how” to get there. In addition, it will enable you to create challenging goals , which will also make it easier to control accounts payable and receivable , aiming to maintain alignment in the execution of the plan.

Every good plan starts with a diagnosis of the company’s current state , so take the opportunity to analyze the results obtained in recent months. Is your business in the red? What is the current debt? What is the profit margin? This way, you will have a more complete view of what is happening in your business .

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