Review accounts receivable industry publications to stay informed of trends in collections, bad debt write-offs and accounts receivable systems. Trends in accounts receivable are one of the first signs of changes in an economic climate and important to pay attention to.

Schedule regular meetings with your accounts receivable professionals to discuss industry news and trends. Make sure staff are keeping up to date to ensure the best practices are in place. Follow the three steps below for more guidelines on managing accounts receivable and to stay current with industry trends:

1. Subscribe to accounts receivable industry news.

2. Use accounts receivable market research services.

3. Interpret accounts receivable metrics.

Action Steps
The best contacts and resources to help you get it done

Review accounts receivable industry publications

Subscribe to the newsletters and magazines provided through the various organizations involved in account receivable management. These firms have set up an accounts receivable system to increase the profile of accounts receivable services and providers. Read these articles for up to date information on industry trends and discussions.

I recommend: Sit down with your accounts receivable staff and discuss the articles published on Inside ARM or in the Advocate Accounting newsletters. These publications are a great source of information, data and thought provoking discussions with your accounts receivable staff.

Subscribe to accounts receivable market research services

Join your colleagues and subscribe to accounts receivable market research. These services provide a wealth of information on accounts receivable companies, current accounts receivable software offerings and other news. Use the most recent information to shape your decisions and improve your business functions. Analysis the information provided and focus on the changes in the local economy as they have a more direct impact on your firm.

I recommend: Evaluate the results of the market research services available to determines which firm is best to meet your needs. Market Research and Credit Research Foundation both offer detailed analysis, reports, discussion forums and more to improver your information and thereby your decisions.

Receive accounts receivable industry reports

Investigate the various options for accounts receivable solutions by reading the latest news. There are a wide range of accounting rules and practices that have an impact on collections and a/r solutions. Stay informed to avoid costly errors due to changes in law or taxation guidelines. Track the success or failure of collections firms, accounts receivable factoring firms to add to your knowledge of industry trends.

I recommend: Sign up for Smart Business Ideas magazine to receive accounts receivable news and trends. This well known information company provides valuable insights into accounting changes that impact on accounts receivable. Goliath Business News is the publisher of a wide range of business magazines and journals.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Accounts receivable is critical to cash flow and success of any business. Invest the time necessary to stay current and take advantage of new technologies or business practices.

In today's troubled economy, late or unpaid invoices are a fact of life for any business that doesn't collect in full upfront. But there's much a business can do to head off trouble before it starts, or to speed up payments. The key is to create a clear collections process at your business. It starts by making smart credit-granting decisions in the first place.

"But I don't grant credit!" you may protest. Yet anytime you deliver a product or service without first collecting payment you are, in fact, granting credit. If you are ever at risk of not being paid, you are — like it or not — a creditor. These five keys to better collections can help you get started:

1. Make your invoicing quick and professional
2. Check credit of major customers ahead of a sale
3. Write customized, personal dunning letters
4. Offer incentives for quick payment
5. Get on the phone with late payers

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Use invoicing software or web-based billing services for a professional look

Crack collections require a buttoned-down invoicing system that's now easier than ever thanks to invoicing software and online invoicing services for small business owners.

I recommend: Two standout services that help you create, send and manage invoices easily online are FreshBooks and Bill.com. MyInvoices & Estimates is a low-cost software package from Avanquest that helps you create professional-looking estimates, invoices and statements from your own PCs. QuickBooks online also has invoicing features.

Outsource for credit and collection services

D&B Small Business Solutions delivers a variety of debt collection services, including demand letters.

I recommend: D&B's debt collection services can help you collect money owed to you without alienating customers. Or hire your own outside collections department through an affiliate of the National Association of Credit Management. Search by city and state for a provider in your area.

Make your demand letter a grabber

Get online help writing a dynamic dunning letter that will produce quick results.

I recommend: Business Letter Templates can help you write a good collections letter. WriteExpress has excellent tips and letter templates as well. The DunsDemand Letter is an effective "wake up call" for slow payers and will result in a "Placed for Collection" notice in the debtor's D&B business credit file.

Plug into business credit reports

Checking business credit can save you time, money and help you make a more sound and informed credit decision.

I recommend: The National Association of Credit Management has affiliates across the country that can provide a wide range of credit reports on businesses large and small as well as business owners and foreign firms. Find a supplier in your area at the NACM site.

Summon the collection cavalry while there's still time

Each passing month dramatically reduces your chances of getting paid. Consider bringing in a collection agency after 90 days.

I recommend: ACA International can help you find a collection agency, attorney or other professional in your area. Commercial Collection Agency Association members are the only group of agencies certified by the Commercial Law League of America.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Your invoice should be clear and simple. It should state explicitly, in itemized fashion, what it is for. Fancy colors or cute designs detract from the purpose. Online services mentioned above will get you a clean, professional look.
• •  Send a real invoice, not stationery with 'amount due' typed in. Make it clear what business name the check should be made out to, and where it should be sent. Include a phone number for questions.
• •  Missing or confusing information offers an excuse for delay.
• •  Send invoices the moment money is due. If payment isn't received by the stated deadline (30 days, for example), send a reminder on day 31, not the next cycle.
• •  If you undertake a long-term project, consider progress billings.
• •  Request credit references from customers, make inquiries yourself, buy commercial reports (from D&B for example), or combine all three.
• •  The better your collection letter, the faster the money will flow. Make it a customized, personal letter, not a lifeless form letter. Remind the debtor of his or her original promise to pay. And ask for immediate and full payment (obvious, but often left out).

Invest time to learn about accounts receivable (A/R) basics and the impact on your businesses cash flow. Accounts receivable invoices are created when sales are made based on commercial credit. An invoice is sent to the supplier with the expectation that payment will be received within a specific time frame.

There are a wide range of accounts receivable software products available to assist in the management of this key business function. There are also multiple options to assist in the collection of payment for services provided. Review the three items listed below for further details.

1. Investigate accounts receivable factoring.

2. Study accounts receivable.

3. Locate accounts receivable collectors.

Action Steps
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Understand accounts receivable factoring

Write down the total value of outstanding accounts receivable in your companies financial statements. Review an accounts receivable aging report from your accounts receivable system. These values can be translated into cash flow through the use of an accounts receivable factoring firm.

I recommend: An accounts receivable company, such as Orange Commercial Credit, provides funds in exchange for the ability to collect on outstanding accounts receivable invoices. Diversified Credit specialized in collections and other accounts receivable services to assist companies in managing this aspect of their business. These types of services are typically used for only the oldest unpaid invoices.

Investigate accounts receivable courses to learn the basics

Look into accounts receivable management courses from your local college or business school. There are a wide range of certificate and diploma programs designed to support efficient management of accounts receivables. In addition to courses in accounts receivable basics, they also offer courses on the most popular accounts receivable software packages.

I recommend: Increase your understanding of accounts receivable and the impact on cash flow by taking courses from Virginia Tech. Study accounts receivable through an online bookkeeping course offered by the US Career Institute. UniversalClass has an affordable online accounts receivable management program that's worth checking out.

Get to know accounts receivable collections firms

One of the basic concepts in A/R is the process of using firms to collect on your unpaid debt so that your company doesn't have to deal with that. Contact accounts receivable companies who specialize in collections of unpaid invoices. These firms improve cash flow and charge a flat fee or a percentage of invoice value.

I recommend: Accounts receivable collections is an important function and necessary to the health of any business. Contact firms, such as Account Adjustment Bureau or The Kaplan Group for information on their collections process. Prepare a list of the oldest invoices, dollar values and make copies of the original invoice and any supporting documentation to assist the collection firm.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  A/R solutions ensure the overall financial health of the company. Large companies often dedicate one accounting staff member to accounts receivable calls and follow up to improve cash flow while maintaining positive business relationships with customers.

Accounts receivable are any uncollected customer invoices and money owed to your company. They generally owe this money to your company for a good or service rendered. On the balance sheet, accounts receivable shows up as a current asset. You always record an accounts receivable as a debit in the receivables accounts first, then after the customer pays the receivable, you'll debit cash accounts and credit the receivables. The sales ledger is the place where you'll record this event. The direct write-off and allowance methods are the two ways you can reconcile the accounts receivables accounts.

However, before you begin the process there are a few key terms that can help you manage these accounts:

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Goods and services

The reason the accounts receivables account exists is to record the money owed to your company for a good or service rendered. A good is something tangible that you can use or consume. A service is an intangible item that you do for a customer in return for payment.

I recommend: Review this clear "goods and services" tutorial at Social Studies for Kids.

Balance sheet

The balance sheet is the financial document onto which you record your accounts receivable accounts. It's listed on the balance sheet under current assets. The balance sheet is a full record of all the transactions by your company during a given time period.

I recommend: Examine the balance sheet primer at VA Interactive to understand this financial document.

Current assets

Current assets are the first section on the balance sheet. There are five major items listed under current assets. These are cash and equivalents, investments, accounts receivable, inventories and pre-paid accounts. Accounts receivable is a current asset because in most cases customers will pay off their accounts in 60 to 180 days.

I recommend: Evaluate the current assets explanations at the Motley Fool and Gaebler Ventures.

General ledger

The general ledger is where your company will record all financial transactions. You'll need to list accounts receivable in a sub-ledger, which would contain the accounts for each customer individually.

I recommend: Study the general ledger information from Business Town.

Direct write-off and allowance methods

The direct write-off and allowance methods are the two ways to account for bad debts in the accounts receivable accounts. When computing business taxes the direct write-off method and the allowance method must be used when estimating the potential losses on accounts receivable.

I recommend: Assess the information on the direct write-off and allowance methods at Cliff Notes.

Debits and credits

In the double entry accounting system, for every transaction there must be at least one debit and one credit entry. Sometimes there'll be multiple entries on the debit or credit side or both. Overall, the credits must equal the debits side of the general ledger.

I recommend: Examine the debits and credits tutorial at Net Books.