Accounts Receivable Software: What Is It and Do You Need It?
If you run a business that offers payment terms to customers or doesn’t require customers to pay up front, then you’re probably going to need accounts receivable software. While it’s possible to keep track of just a handful of customers’ terms, by the time you get to more than half a dozen customers, tracking all their payments and terms will get difficult.
Accounts receivable software might seem basic when you first look at it, but it actually does a lot more than just track unpaid invoices. What exactly does AR software do and do you need it? Let’s take a look.
==> The Basics: Who Owes You Money
The most basic and fundamental function is indeed tracking who owes you money. You can track the debt owed by each customer, track unpaid invoices and track when you expect to get paid.
==> Track Creditworthiness
This is something that’s very difficult to track by hand. If you run a credit-based business, chances are at some point your customers may ask for more credit. They might ask for a longer payment term or for a bigger line of credit.
When that happens, you need to know how good they’ve been with paying their bills in the past. Just like banks use your FICO score to determine whether or not to extend credit to you, you likewise should use your customers’ past payment behavior to determine if they should get more credit.
Have they been late in the past? Do they always repay their balance on time? Do you have to chase them down to get paid? All this should go into making your decision; and AR software can track and report all this for you.
==> Calculate Expected Cashflow
Calculating how much money is going to come in can be very complex if you’ve got a ton of accounts receivables. That’s especially true if you have different customers on different terms as well as partial payment agreements.
AR software can make calculating your cashflow on a month-to-month or even a day-to-day basis much easier.
==> Store Terms, Customer Orders, Contact Information and More
Your AR software can also store all kinds of other important information. You can use it to store all your customer orders, as well as records of whether or not you’ve delivered on those orders. You can store details about your agreements and payment terms with your customer.
You can also store basic information like addresses, phone numbers, who to contact for what, and more.
As you can see, AR software isn’t just about tracking invoices. It’s an entire system to manage your accounts receivables, from managing cashflow to tracking credit and more.