What is AR Billing?

What is AR Billing

Share this Article

If your business provides goods or services without requiring full payment up front, this unpaid money is categorized as accounts receivable (AR). The process of sending invoices, collecting payments, and pursuing unpaid balances makes up the AR billing system your company most likely already follows.  

In fact, most offices have a dedicated department in their organization that is responsible for their billing processes. The system each business follows can be as simple as sending a bill and hoping it gets paid, or as complex as a series of payment notices, late fees and other prompts to decrease days sales outstanding (DSO).

Why Does AR Billing Matter?

Payment collection matters because it is the most direct way to increase your company’s revenue. By creating an efficient billing and late payment collection system, you can increase the amount of money you bring in per month without the effort of pursuing new customers.

Following pre-collection best practices and implementing the right tools can cut down on the time your office staff spends on AR tasks.

Basics of an AR Billing System

There are many ways your office can increase how much your AR department recovers while decreasing the time it takes to do so. But some tactics can be costly and hard to implement (especially among smaller organizations). Here are a few basic tools every accounts receivable department should have that will streamline the payment process.

A Credit and Collections Policy

When a bill isn’t paid on time, it’s in your company’s best interest to continue collection efforts for a short while. However, there are many factors to consider in how your company decides to conduct late payment collections. These determinations should be included in a formal Credit and Collection Policy. Once this is created, include it within your company policies and procedures so all employees can be trained to follow the appropriate guidelines.  

As found on The National Association of Credit Management website, here are points your credit and collection policy should include and points to consider during its creation: National Association of Credit Management.

What is A/R Billing

A Payment Management System

A comprehensive payment management system is one of the simplest ways to improve pre-collection efforts. Finding software that allows you to send out invoices, take multiple payment options and offer customer-initiated payments will free up time your office staff would spend stuffing envelopes and making calls to late-paying consumers.

A payment management system should offer the following:

  • Recurring Payments – If you offer payment plans for your goods, or provide big-ticket services that are hard to pay off in a lump-sum, find a software that can schedule recurring payments. Automatic recurring payments make it easy to create a plan that works for you and your customers. Make sure you never miss out on revenue because of a forgotten payment.
  • Self Serve Payment Options – Some consumers work during business hours. Some simply don’t like speaking with people to pay their bills. Others, especially younger generations (like millennials) find it easier to make payments themselves online. To capture more payments that might otherwise slip through the cracks, provide ways for your customers help themselves through online payment portals and IVR phone systems.
  • Robust reporting – While it isn’t the the most flashy feature to think about, the software you use should offer good reporting. Do you need to track numbers within multiple departments or locations? Do you need to track payments received by individual employees or by payment channel?

      Electronic Invoicing with Payment Collection

      One of the most valuable ways to maximize staff time is to find software that allows invoicing and payment collection in a single step. Look for a versatile tool that allows you to send payment reminders and invoices to customers while including a payment link directly in the communication. By sending a reminder or bill directly to a consumer’s mobile number or email address, you can capture more payments while the action is on their mind.

      Best of all, electronic invoicing and payments allow your AR department to ditch paper letters. That means no more stuffing envelopes and no more filing contracts and invoices. To learn more about the perks of digital invoicing and payment, download the Traditional vs Digital Communication comparison.

      Download Traditional vs Digital Communication Comparison:
      Related Articles
      Expert Advice: Shopping for Accounts Receivable Software