As a new business owner in Singapore, you may not know that you can utilise accounts receivable to sell your products to customers. In this simple and brief guide, we will simplify all the basics of accounts receivable, helping you to handle the term effectively. By the end, you can easily understand how to utilise accounts receivable effectively for the good of your business. You can also get some idea about how accounting and bookkeeping services in Singapore can make this process simple without errors.
When a big or small business sells its products or services to its customer, they usually get paid right away. But sometimes, they allow customers to buy on credit. Accounts receivable is the term used to describe the sum of money that a company is owed for credit sales made during a specific time frame. It appears on the balance sheet as a current asset.
When a business sells something on credit, they give the customer an invoice and collect the money later. So, accounts receivable represent the money that customers owe the business for products or services they have already received.
Benefit Of Accounts Receivable
Accounts receivable allows businesses to help their customers, which is one of its key benefits. If a customer lacks the cash to buy goods right away, the business can give them a grace period to pay (15, 30, or even 60 days). Thus, accounts receivable customers buy now and pay later.
Accounts Receivable and Accounts Payable: The Major Difference
Accounts payable, the opposite term of account receivable, represents the cash a business owes to its suppliers or vendors for products or services received.
In simple words, we can say that if a company receives an invoice from a supplier for materials bought, the sum becomes payable. It appears on the balance sheet as a short-term debt (or current liability), denoting the company’s commitment to pay the supplier.
4 Things You Can Do To Improve Your Account Receivable
It is crucial to effectively manage accounts receivable because making sales doesn’t matter if you can’t receive the money. Here are a few simple tips to turn your receivables into cash:
- Have a clear written policy for collecting accounts receivable and make sure to enforce it. For example, mail the customers who are late by more than 30 days and call them if they have crossed 60 days. You can also charge late fees and, if necessary, involve a collections agency or attorney.
- Consider offering your clients a small discount (like 5%-10%) for paying their invoices early. Although it means earning slightly less, it is often worth it to avoid chasing overdue customers. Plus, you will get the cash faster.
- Use invoicing software to automate the process, making it easier to track current and overdue invoices. This reduces errors, allows faster invoicing, and helps manage a larger number of customers.
To gain a better understanding, let’s examine the size and growth of the accounts receivable automation market. Experts predict that the global market for accounts receivable automation will experience a growth of 14.2%, reaching a value of USD 6.5 billion in the coming years. In 2022, the market was valued at USD 3.3 billion.
- Provide convenient payment options like online payments or payment via text message.
By following these tips, you can improve your accounts receivable process, collect payments faster, and ensure better cash flow for your business.
Are you considering the possibility of hiring a professional to make all these processes simple? If yes, look no further than Interactive Accounts and its team of specialists. As a leading provider of reliable accounting services for small businesses in Singapore, they excel at optimising accounts receivable. Connect with their expert professionals, discuss your unique needs, and unlock exceptional services at competitive prices.
Take control of your finances with Interactive Accounts today!!!