AR/AP
Accounts Receivable and Accounts Payable Management
Effective collections begin at the moment of a project being awarded. Reducing the collection period can significantly boost cash flow, leading to a meaningful impact on your bottom line. To achieve this, a company must establish clear standards for its receivables, designate responsible individuals who have the authority to enforce these standards, monitor performance, and hold team members accountable for outcomes.
Cash is essential for business success.
Without it, you're left with nothing but the costs associated with producing your jobs. When your customers retain your cash, it can cost you approximately 9% in potential earnings. Conversely, when you have that cash on hand, you can earn an estimated 9%, resulting in an 18% swing in your bottom line based on cash flow. Therefore, timely billing is critical. Billing should occur daily; weekly or monthly billing is inadequate. Weekly billing can extend the average collection period by four days, while monthly billing can add a staggering seventeen days. Time equates to money, and longer intervals between billing increase the likelihood of errors and omissions.
Collections should also be proactive and conducted via telephone.
Many effective cash management strategies encourage owners to delay bill payments as long as possible without damaging their credit. To gauge how long you can wait, aim to send payments so they arrive just a day before the creditor contacts you. In contrast, early telephone follow-ups on collections can expedite payments, ensuring that you maintain a healthy cash flow.
Shapcott & Lauber can play a crucial role in optimizing your accounts receivable and payable processes.
Our expert team can help you establish efficient billing protocols, implement robust cash management strategies, and provide the tools necessary for effective follow-up on collections. With our tailored solutions, you can enhance your cash flow, reduce collection periods, and ultimately strengthen your bottom line.