The key to managing accounts receivable portfolios is process optimisation and resource allocation
As sales on credit increase, so do outstanding accounts receivable and bad debts. Given their intractable nature, outstanding receivables often require extra resources to be collected and are not always handled properly. Many textile opt to avoid it altogether by parking the outstanding receivables or writing them off. However, this is not a sustainable approach. When your accounts receivable process becomes suboptimal, it is hard to discern where problems lie. If there is no action taken, the same problems persist and could turn new deals into new overdue accounts, and turn existing outstanding receivables into bad debts.
With accounts receivable being one of the biggest assets on a company's balance sheet, revenue loss is not the only consequence of bad debts. Working capital, profitability, and competitiveness are also at risk. It is imperative for textile companies to develop viable strategies to tackle outstanding accounts receivable head on if they want to increase liquidity and aim for growth.
The following four strategies are devised with the goal of efficiency in mind. By implementing them with discipline and focus, you will be able to curb the number of outstanding receivables, put your available resources to good use, and augment your debt recovery in the most effective way.