There are many reasons companies spend a fortune on technology. Often this investment is not to replace human intervention, but to enhance it by allowing users to work faster and smarter. The same is true for ‘Accounts Receivable’ (AR) too and AR automation will augment functions and departments.
It will prompt your finance team to be efficient in collecting their outstanding invoices and help your sales teams knock down their sales targets without bringing in delinquent customers.
In this article, we have shed light on five ways AR automation can help functions such as Sales not only get new businesses or get recurring business but also help their finance team maintain a positive cash inflow.
AR automation covers several aspects and unified data availability is one of them. It is critical that sales as a function get access to finance information like contact details, activity counts, disputes and broken promises, credit limit, open issues, open and overdue invoices, payments, average days to pay, and a summary of communication.
A well-designed, cloud ERP and CRM ecosystem will help break down data silos and give your sales team critical financial information and help them to have better sales forecasts, credit-risk intelligence, and genuine accounts that bring in cash flow.
Inter-department collaboration in the workplace amplifies an organization’s profitability. Let us take the example of the sales team having access to key AR intel on existing customers. Now your sales field agent armed with the information will discontinue receiving sales orders from those clients if your AR team has red-flagged them.
This way they can be on the same page with the AR team with regards to restricting the client’s credit extension. Research shows that inter-team coordination can reduce bad debts by as much as 10%.
The finance team will match invoice dates to the shipment dates for those items in the shipping log to see if sales are being recorded in the correct accounting period. This helps the sales department to get an accurate sales closure and delivery figure for the month.
Moreover, this activity validates both the invoice and the shipping sheet to ensure that the goods and services mentioned in the invoice are shipped to the customer’s delivery address.
Granting credit to your customer means they don’t need immediate cash to make a purchase. This can boost sales for small and medium-sized businesses. But both the sales and the AR department should ensure that they offer credit to only reliable customers.
As statistics suggest 25% of invoice payments for medium-sized businesses are paid late. The finance with their data analytical expertise can assist salespeople to obtain the most relevant information about the company’s customers such as insight into credit limit, behavioral trends, payment history, intel on current projects and even projected customer profits.
Sales teams can make smarter decisions about offering extended credit during order renewals if your AR team updates them with key intel such as late payment history and payment defaults.
AR teams can also share other details to sales like customer credit score, customer behavior analysis, or client trends to sales to both bring in and retain existing businesses. In fact, a 5% increase in customer retention can boost your bottom line by 25%.
Customer Finance allows your customers to spread their expenditure for goods or services over time. This means both you and your customers benefit from an improved cash flow position. Allowing your customers to buy on finance also means that they are more likely to buy as the monthly payment amounts are less and not prohibitively high. This boosts sales as a result.
Customer finance also urges your customers to take high-value packages thereby increasing your average sale amount. A Forbes article mentions research from Forrester which found that businesses providing customers with a financing option experienced a 32% increase in sales. The same Forrester study also reported an average increase in order value of 75%.
Leaders of business houses must focus on bringing sales and finance teams under the same umbrella if they want to have a competitive business edge.
One of the best ways of doing this is to share each other’s KPI. For e.g, a sale will be a genuine sale for a salesman when the customer pays their first three month’s invoice.
Likewise, an AR employee gets a bonus when sales can upsell to existing customers or bring credible business with the help of financial analytics and customer credit information. Sales and finance departments play significantly different roles in a company, but leaders must reconcile their roles to focus on the bottom line.
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