Your business accountant has several tasks. Not only does your accountant help find ways to lower your tax burden, but they take on tasks such as collecting, reporting, and recording financials. Additionally, they may also give you business advice on how to find new opportunities to generate income.
An accountant also manages your account receivables and deals with clients, vendors, and financial institutions such as banks, investors, and government agencies on your company’s behalf.
Accounts Receivable Turnover Ratio
Clearly, an accountant has many critical roles in an organization. But a good business accountant can also help enhance your account receivable turnover ratio. Of course, this raises the question: what is an A/R turnover ratio?
Your A/R turnover ratio is an accounting gauge that shows how efficiently your business collects money from customers. The longer you take to convert unpaid invoices into cash, the worse you’re A/R turnover ratio.
How Can an Accountant Improve My A/R Turnover Ratio?
An experienced accountant can improve the effectiveness of your receivables department in several ways:
- Background Checks: An accountant can ensure that you only extend credit to customers in good financial health. They may check a potential client’s books to see if they’re trustworthy. They made also look up their reputation to see if they owe money to other vendors. An accountant can also examine a customer’s business credit report to identify red flags.
- Contracts: A professional accountant can help craft a watertight agreement that may help you resolve disputes.
- Invoices: Your accountant can ensure that correct invoices are sent to customers. Incorrect invoices usually lead to frustrating payment delays.
- Incentives: A clever accountant can build incentives into billing for timely payments. For example, they include early payment bonuses or late-payment fees to encourage your clients to pay on time.
Of course, even the best accountant in the world can’t protect you from a difficult customer. When your customer doesn’t pay on time, send out payment reminders quickly via email. Follow it up with a phone call or a visit to their accounting department a week later.
You may consider looking for consumer or commercial debt collection agencies if the customer refuses to pay or stops responding to your queries. As your accountant will tell you, time is of the essence as far as bad debt is concerned.
Statistics suggest that debt becomes harder to collect as it gets older. Either the entity that owes you money may skip town, bide time until the statute of limitations passes, or declare bankruptcy. In case of insolvency, you don’t want to lose the race to your customer’s other creditors.
Thankfully, a resourceful collection firm can locate debtors, even if they’ve destroyed their identity and moved to another part of the country. An agency with a powerful skip tracing department can use its databases to find your debtor and their assets.
A good collector can also help you fight a legal battle against a stubborn debtor. Of course, you must conduct a cost-benefit analysis with the help of your accountant before pursuing the debt in court. Regardless of the direction you choose, your trusty accountant will be on your side.