As an entrepreneur, you’re always balancing your customer’s satisfaction and your bottom line, especially if you’re developing a list of consistent clients. Nothing represents this as well as the accounts receivable line item on your financials.
Accounts receivable planning is both a convenience for your customers which fosters lasting relationships and a scourge on your cash flow if poorly managed. To maintain balance, you must square customer service with your financial needs.
Accounts Receivable: A High Elevation Perspective
It is easy to lose sight of the bigger picture when diving deep into the line items on your financial statement. A broad perspective will help you establish a balanced accounts receivable strategy.
Review your cash flow statement and your accounts receivable to identify any changes needed in your strategy. It’s important to be flexible with your customers, however overextended credit could jeopardize your cash flow and financial stability. Keep in mind what you’re trying to achieve, even if it requires a difficult conversation with customers which have become reliant on endless credit.
Balance your accounts payable against your accounts receivable timelines. A gap between these dates will wreak havoc on your cash flow in the future.
Rely on Trusted Partners
Many entrepreneurs lack a thorough understanding of financial dynamics. This is not a commentary on your lack of business skills, but demonstrates your need to surround yourself with trusted partners which are experts in their fields. Your accountant should be a trusted partner who can walk you through your financials and help you develop effective strategies.
A balanced cash flow and clear accounts receivable strategy will keep your customers happy, as well as free the cash flow needed to keep your business thriving.