Here’s a structured approach to establish and manage Accounts Receivable (AR) Management and Credit Control by G2G Consultancy:

 

1. Develop a Credit Policy

• Define Credit Terms: Establish clear credit terms (e.g., 15, 30, or 60 days) tailored to different client categories.

• Set Credit Limits: Assign credit limits based on clients' creditworthiness and payment history.

• Credit Evaluation Process: Use financial analysis, references, and credit reports to assess a client’s ability to pay.

 

2. Establish Clear Invoicing Procedures

• Invoice Design: Ensure invoices are professional and detailed, and include payment terms, due dates, and penalties for delays.

• Timely Issuance: Send invoices promptly upon completion of services or delivery of goods.

• Digital Invoicing: Use accounting software to automate invoice generation and distribution.

 

3. Monitor AR Aging

• Aging Report Generation: Regularly generate AR aging reports to categorize outstanding invoices by age (e.g., 0-30, 31-60 days).

• Follow-Up Protocols: Implement reminders at specific intervals (e.g., 7 days before due, on the due date, and post-due).

• Priority Escalation: Focus on high-value invoices and older receivables for immediate resolution.

 

4. Payment Collection Strategy

• Friendly Reminders: Send automated or personal reminders close to the due date.

• Follow-up calls: Contact clients to confirm receipt of invoices and resolve any issues causing delays.

• Settlement Plans: Offer flexible payment plans for clients facing temporary cash flow issues.

 

5. Implement Credit Control Measures

• Advance Payments: For high-risk clients, require partial or full advance payments.

• Penalties for Late Payment: Enforce late payment charges as a deterrent.

• Hold Services: Pause services for clients with overdue accounts until payments are resolved.

 

6. Streamline Dispute Resolution

• Dispute Logging: Maintain a system to log disputes and assign responsible teams for resolution.

• Resolution Timeframe: Resolve disputes quickly to avoid impacting cash flow.

• Root Cause Analysis: Identify recurring issues (e.g., invoicing errors, unclear terms) and address them proactively.

 

7. Regular Reconciliation and Reporting

• Reconcile Records: Match AR records with bank statements to ensure all payments are accounted for.

• Performance Metrics: Track KPIs such as Days Sales Outstanding (DSO), collection effectiveness index, and overdue percentage.

• Weekly/Monthly Reports: Provide management with updated AR status and insights for decision-making.

 

8. Build Strong Client Relationships

• Proactive Communication: Maintain regular communication with clients about upcoming due dates.

• Value Addition: Offer payment flexibility or rewards for early payments to build goodwill.

• Client Feedback: Act on client feedback to improve the AR process and avoid future disputes.

 

9. Leverage Technology

• AR Automation Tools: Use AR management software (e.g., Zoho Invoice, Tally, QuickBooks) for efficient tracking and reminders.

• Integrated Systems: Ensure seamless integration between AR software and the general ledger for real-time updates.

• Analytics and AI: Utilize analytics tools to predict payment trends and flag potential defaulters early.

 

10. Review and Improve

• Periodic Policy Review: Revise credit policies annually or as needed based on client trends and market conditions.

• Team Training: Provide ongoing training to the AR and credit control teams on best practices.

• Feedback Analysis: Use feedback from internal audits and client interactions to refine processes.

 

This structured approach will ensure G2G Consultancy efficiently manages receivables while minimizing credit risks, maintaining healthy cash flow, and fostering strong client relationships.