Revenue streams or what are often referred to as revenue streams are the various sources from which a business earns money, either from selling goods or providing services. Basically revenue streams categorize the revenue that a business generates from certain pricing mechanisms and channels. To put it simply, a revenue stream can take the form of one of the following revenue models:
- Transaction-based income
Represents the proceeds from the sale of goods which are usually customer payments.
- Service revenue
Revenue generated by providing services to customers and is calculated on a time basis. For example, the number of hours of consulting services provided.
- Project income
Income earned through working on a project
- Recurring income
Revenue from ongoing payments for ongoing service or after-sales service to customers. The recurring income model is the most common model used by businesses because it is predictable and ensures a continuous source of company revenue.
Please note that receivables are one of the company’s revenue streams. Proper management of accounts receivable will have a significant impact on your business’s cash flow income. With receivables management carried out efficiently it will have a positive impact on your business such as timely payments, good relations with clients, and high liquidity in the business. On the other hand, bad accounts receivable management can lead to lost revenue, and poor cash flow in the business.
What is Accounts Receivable Management?
Accounts receivable management is a system or process carried out to track accounts receivable, the processes include:
- Billing and invoices.
- Payment process.
- Communication with clients.
- Communication and internal processes.
- Billing process and credit policy.
The following are tips for improving accounts receivable management in your business and making collection of payments easy and efficient so as to speed up the company’s cash inflows.
Use Electronic Billing & Payment
Abandon the use of paper bills and paper checks because billing models like that are easy to lose and time-consuming to track down. We recommend switching to an electronic invoicing system that allows clients to make payments easily online. Integrate billing and payments this way automates record keeping, so you leave less room for error. By doing so your business will be able to continue collecting payments, while maintaining tailored communications with each customer, without wasting extra time.
- Clear Billing Procedure
Make sure your billing process is clear and consistent. Your billing process should include the following:
- Billing period and invoice date.
Complete information that must be included on each invoice such as purchase order number, address, date etc
- Recording procedure.
Periodic AR assessment and follow-up.
- Billing procedure for overdue payments.
In addition to the daily, weekly, and monthly steps you need to follow to accurately bill clients, include in your documentation the billing contact information for each client and payment details for each client.
Set Credit & Billing Policy
Establish a clear credit policy beforehand to avoid giving too much credit to multiple clients. Similarly, in the collection policy, it should include periodic reviews of receivables and the steps to be taken to follow up on clients who are past due.
With clear procedures, you can proactively collect payments. Electronic billing and payment systems can help centralize and resolve invoicing and payment issues with your clients. For example, you can set up your invoicing software to follow up with clients on the first day of a late payment, then weekly until the account is settled.
Make it Easy for Customers
Most of the payment problems encountered are because clients have difficulty receiving, viewing, or understanding billing invoices, or because they don’t have access to a fast and convenient payment method. Use an electronic invoicing system that can help send invoice information directly in an email to avoid triggering spam filters with attachments. Set up an electronic payment portal that allows clients to pay online as soon as they read your invoice.