Accounts Receivable and Credit Control are often underrated back-office functions but let’s put this in context: you’re important; vitally important. If Credit Controllers set credit limits too high and fail to review credit worthiness, it creates problems down the line – expenditure is balanced by income and the business can start operating at a loss, or more of a loss. During the crisis period of 2020-2021, when lockdowns threw many businesses into disarray, this came into sharp focus. The number of insolvencies now is rising in a great many sectors. So, apart from tightening credit control policies, what else can be done and why is AR or Order to Cash one of the most important areas of the business?
Market Forces
We all know that costs are rising, imports and exports are fraught with difficulty and supply chains are disrupted. Add to that inflation, staff shortages and rising salaries and it looks like expenditure could easily exceed income, threatening the very core of the business. These market forces are not minor, they are squeezing customers and therefore exert pressure on businesses that sell on credit. Accounts receivable will need improve operations, tighten processes and provide business intelligence to keep your finance team fully informed about its relative strengths, weaknesses and risks.
Time to Cash
The time from order fulfilment to cash received can be reduced by speeding up the processes of getting invoices out. Automation can help this – and the beneficial side effects are:
Data Accuracy – no errors in transcription makes for fewer queries and complaints
Productivity – you win back time that teams would otherwise have spent on mundane tasks
Intelligence – you gain insight into customer behaviour and have a vast array of data to shape and model to determine your next move in handling customer accounts and mitigating risk.
Cashflow – invoices out sooner often does translate into money in sooner because many companies do fortnightly or monthly payment runs – a few extra days earlier and you may fit into an earlier payment run.
Collections Crackdown
Crack down on late payers with a series of automated letters – including one pre-term reminders. Creating a set of letters, or sets of letters, differently worded for discrete customer groups, and letting them roll automatically for selected customers will mean you will always be on their case – they will not be able to forget that their payment is overdue and, better still, you will have evidence of when they downloaded the letter and read it. You don’t get this if you send reminders by post. Who does that now anyway, since half the population is working from home at least half the week? And just sending an email with a PDF attachment? How often do those go unopened: lost in a sea of junk mail and noise? You need to employ a collections process that works well so you need to:
Think of implementing a portal when all invoices sit, where you can view which invoiced have been retrieved, when and by whom
Select which of your customers are to receive which of your letter sequences
Swap customers dynamically to different sequences based on criteria such as total outstandings
Set the last letter in the sequence to run weekly until payment is received
Design sequences of just letters or letters and calls, which are scheduled for you
Log of all activity against all documents so you know for sure when letters have been downloaded by customers
Your customers receive time-expiring links to the portal and if they don’t collect their letters within a certain number of hours or days, they have to request a new link.
If this happens, you’ll know. You’re in control of how long you give customers before they have to request a new link, so the shorter the time period you set, the swifter they need to act – which trains them into prompt behaviour. The beauty of all this is that customer cannot pretend not to have received invoices or reminders – you have a fool proof log of who accessed documents and when. Once customers know this, they start to be more vocal and tend to engage in conversations about why they are not paying on time instead of making excuses.
Dispute Resolution Revolution
Open queries, claims and disputes are barriers to payment. The sooner you can get these resolved, the sooner you can get paid. Corrivo helps you set terms with stakeholders – you state how many days they must reply to your email, which is sent directly from Corrivo. If they do not respond, the query or dispute is escalated to their manager. A few of these escalations and your internal contacts will start paying attention. All of a sudden, your team has leverage: AR has a voice not only with contacts internally, such as in operations, sales or distribution, but with suppliers too, for example, with delivery companies or parts suppliers. This system gives the AR team the power and authority they need to close off claims quickly and it builds a data trail that can be used for root cause analysis. This leads to preventative change. Any company that does not give its AR team these tools is leaking capital into written off debt or outstandings.
Empowering Credit Professionals
AR automation is not just about a pretty billing platform or a neat collections tool – it’s about helping specialists do their job well so they can be the guardians of the company’s liquidity and profitability. If it takes 10 days longer to make a product and get it to market if supplies run short to fulfil orders: that’s a late delivery or a missed opportunity. If a dispute takes an extra 10 days to resolve or an invoice is paid 10 days later due to the lack of systems and processes, that’s an added cost – a waste of money and a depletion of profitability.
Think about it: if you sell loads but throw the revenue away, how financially sustainable is that?
If you are interested in how achieve these goals please feel free to reach out to me and will happily go through some possible solutions, alternatively, there is a system which can already help you achieve the above and so much more - www.datainterconnect.com/corrivo/demo/
