There are several steps a business should take to manage accounts receivable.nnDefining Credit Policy & TermsnnYour business's credit policy includes how customers get approved, how long customers must pay, and what happens in the event of non-payment. Stating the credit policy in clear terms upfront helps the customer understand their obligations. It also creates a legal framework if your business needs to go to collections.nnCredit policies should include payment methods, deposit or down payment requirements, late payment fees, or early payment discounts. Invoices should reflect the credit policy as well.nnCredit Approval ProcessnnDeciding to extend credit to customers presents some challenges. For one thing, your business needs the revenue to support cash flow. You're also taking a risk if the customer doesn't pay.nnSome companies run credit checks on their customers before extending credit. That's not always possible, though. In most cases, the customer has reasons for needing a delayed payment.nnTalk to your customers and ask why they need the delay and how they'll get the money to pay the invoice by the due date. Extending credit is most common in the business-to-business (B2B) space.nnSometimes the company must wait for its own A/R revenue to come in before paying off its accounts payable.nnAccurate InvoicingnnInvoices should list the goods or services rendered, the amounts for each, the customer's name and information, and due dates.nnWhen extending credit, the customer agrees to specific terms. Ensure those terms are reflected on the invoice.nnMake sure your invoices look professional, are easy to read, and include your company's branding. Solid invoicing practices ensure you and your customers are on the same page. It also helps to have detailed information on what's owed if a payment dispute arises.nnA/R Tracking & ReportingnnTracking and reporting are essential parts of an AR management plan. Companies must have a process in place to understand when and how they're getting paid and when to send payment reminders.nnIn addition to tracking A/R, companies should also maintain customer data. Some businesses use CRMs to track customer payment patterns and accurately forecast future payments. In addition, CRMs help to manage the relationship with the customer and improve service.nnSetting Up a Collections PlannnThe first component of a collections plan is the in-house collection activity. This includes sending the initial invoice and payment reminder before the due date.nnIt also includes late payment reminders and fees, if any. In-house collections could also involve working with customers to set up payment plans or other arrangements.nnUnfortunately, customers sometimes don't pay their invoices, no matter how proactively your company pursues payments. There is a wide range of reasons why customers are unable to pay. But your business must collect payments, which sometimes means working with a collection agency.nnTry to find an agency with good rates and proven success in your industry. Hopefully, you'll never need to turn bad debt invoices over to a collection agency, but it's best to have a plan just in case.