As your company evolves and starts to sell more of its products or services, you’ll need to focus on scaling your accounts receivable and improving speed, visibility, and accountability. Suddenly, the challenges that were already present in A/R are magnified, and your company now needs to learn how to streamline your process to see an improvement in their cash flow as soon as possible.
Let’s address these challenges one at a time:
- Manual processes are inefficient – Many companies still rely on spreadsheets to hold the data for their A/R collections, and each collector has his or her own process for collections. Without a way to streamline the process, these manual processes consume time and resources and often lead to human error. This includes invoice reconciliation, which traditionally relies on manual methods to match payments to their corresponding invoices.
- A/R data is not centralized – When collectors don’t have easy access to A/R data in one place, it makes it difficult for them to respond to customers effectively, customize their messages and proactively respond to avoid disputes.
- A/R data is not tracked and measured – The inability to centralize data also makes it more challenging to track and measure A/R performance. Although ERPs do offer traditional financial analytics and metrics, A/R invoice-to-cash management platforms focus on tracking and measuring the collections process. Ideally, this should be done on both a team and individual level, with the ability to customize dashboards to highlight different metrics and KPIs based on various roles in your organization.
- Evaluating customer credit – Reviewing credit risk and managing credit applications is another traditionally manual, time-consuming task. In addition, without having access to a customer’s credit and payment history, it is difficult for A/R teams to accurately assess the potential risk of each customer and develop the appropriate credit management strategy to mitigate that risk.
- Recurring overdue or late invoices – Organizations may regularly deal with delinquent accounts, either from customers experiencing financial hardship or simply those who are unable to keep up with the dozens of invoices they have each week. Late payments mean longer conversion-to-cash cycles for your company, impacting your cash flow and ability to do business.
- Dispute management consumes resources and hurts your brand – Disputes are one of many manual processes within accounts receivable that can take time to resolve. As customers wait for a resolution, they may churn or become disillusioned with your brand.
Automating Accounts Receivable Processes
An A/R invoice-to-cash management and automation platform like Gaviti is the fastest way to help eliminate the challenges above. First, it enables you to manage all stages of the accounts receivable process, from assigning tasks to automating and streamlining many simple but time consuming day to day tasks. Second, it gives companies a single source of A/R performance and activity to track and measure your A/R team’s efforts. Data is collected and aggregated in one point, in addition to customer interactions – whether recorded in an email, phone or notes. This makes it much easier to communicate with customers and include important information on invoices such as payment terms and past invoices to collect receivables in a timely fashion.
With the ability to analyze past A/R performance and connect it to other data such as creditworthiness and current collections status, it prioritizes collections to focus on high-value activities to optimize your collections process. Finally, it allows your company to develop collections assets tailored to your needs, such as specific templates for high-risk accounts or their translation into the language of that geographic region. All of these elements work together to facilitate the timely collection of invoices and the improvement of your cash flow.
Many companies look to an ERP system to help them streamline the A/R process but quickly find that it is limited in dunning functionality, the ability to customize reports and connect and optimize data within different parts of the financial department. When your company reaches the stage where it is serious about improving its collections performance, it should consider an A/R invoice-to-cash management platform that connects to any ERP and even multiple ERPs and one that can be set up quickly, with limited involvement from your IT team.
Delivering Effective A/R Throughout the Invoice-to-Cash Lifecycle
An A/R invoice-to-cash management platform not only streamlines and automates your collections process, but the process along the entire A/R lifecycle. By connecting your collections data to different types of accounts receivables data, you’ll optimize your collections process and improve your cash flow.
Here are a few examples:
- Credit management and monitoring – Mitigate risk by monitoring and receiving alerts in real time about which customers present any immediate credit risk. You can also set automatic credit limits based on past payment history, minimizing your company’s exposure to credit risks in the first place.
- Disputes and deductions – Deduction and dispute information are visible to the entire A/R team, fostering greater collaboration to work toward their resolution. Proper stakeholders responsible for resolving specific issues are alerted when relevant.
- Self-service portal – Facilitate timely collection of receivables by offering customers multiple payment options (ACH transfers, electronic wallets, debit and credit cards) including integration with a variety of payment gateways such as Snap and Stripe. It also enables customers to pay at their convenience and have the payments reconciled to the invoice automatically, giving both customers and businesses greater visibility of their cash flow.
- Cash application automation – Automate the cash application process, intelligently matching invoices to the appropriate customer payments with a high level of accuracy. Advanced accounts receivable solutions also enable this with both single and multiple banks.
- Collections analytics – This should include both traditional metrics, such as DSO, customer risk and collections rate, as well as more complex metrics such as Median Days Delinquent (MDD) and payment forecasting. These metrics and KPIs should be available both on an individual and team level to gauge A/R performance. The collections analytics should also work together with other elements of the A/R platform to ensure greater visibility into the entire A/R lifecycle.
Accounts Receivable Operations as a Strategic Player in Your Company’s Growth
By streamlining and automating the entire A/R process, you’ll find that it leads to better customer communication, greater collaboration between team members and key stakeholders, increased productivity, greater efficiency in the collections process and of course improved DSO. There’s another benefit to your A/R team as well: When it demonstrates that it can improve your collections performance and cash flow, it transforms itself from an operational and administrative role into a revenue generating team for your company, and an important player in your company’s growth.
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