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5 ways to track receivables to succeed and thrive

What you’ll learn

  • 5 mistakes to avoid for better receivable management
  • How can financial analysts collect more in less time?
  • The benefits of smart AR automation for business growth

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin. In the face of global disruptions, organizations face unprecedented challenges. Steady cash flows are vital to keep your business going in these times. The way most CFOs and financial analysts prioritize collections and customer retention is also evolving to keep pace with the digital world. Across businesses and industries, there is an irrefutable demand to adopt automation techniques to improve collections. Listed below are five common mistakes AR automation helps to avoid. Let’s dive into the key areas to understand how automation can help cut costs and drive revenue collection.
Mistake #1: You manage collections manually    The amount of work involved in collecting payments, following up with customers, and reporting is overwhelming. It is time-consuming and involves a high risk of miscommunication and human errors. It can impact your collections and customer retention as well. Using paper-based workflows or other manual methods to track payments is error-prone and cumbersome. To make things worse, what if your primary collector plans to quit your company? It will be time-consuming to start from scratch and chase down defaulters. How to fix it? Fight complexities with automation Imagine there is a dashboard with built-in collection strategies to prioritize your team’s worklist for the day. You know the number of calls to be made and payments which you’ll receive. Life looks so bright and easy. This is how AR automation will benefit you and your team’s clerical efforts. With AR apps, you get dashboards with built-in collection strategies to prioritize your worklist for the day. Automated cash reconciliation and smart dunning will help eliminate errors and improve collections.
Mistake #2: You offer limited payment options to your customers   Providing customers clear payment terms alone is not enough. You are bound to encounter customer delays if your payment options are limited. Along with accurate invoices and statement information, customers also look for accessible modes of payment. If you are allowing only one or two payment options, you will narrow down their ability to pay sooner. The last thing you want is to hinder your business’ growth by not considering your customer preferences on payment methods. How to fix it? Offer multiple payment options Implement digital payment methods for your customers to clear dues. Sticking to a single option will only block your cash flows. Use AR automation software to capture and process frictionless electronic payments for your business. AR integration will also significantly reduce your time to collect payments. It can support multiple payment options such as automated clearing house (ACH) transfers, debit cards, credit cards, payment discounts, and other modes.
Mistake #3: Limited time for analyzing reports and assessing credit risks You may extend your service on credit to customers, but not at the cost of it turning into bad debt. Without proper analysis of customers’ credit reports, you risk extending credit to businesses and people with poor ratings. How many times have you run a background check on your customers to know their credit history? It is important to study customers’ credit risk profiles when business-on-credit is the starting point of your sales cycle. How to fix it? Assess, analyze and report How much time do you spend on credit scoring and customer segmentation? With AR integration, you can eliminate manual efforts and reduce the time spent on credit risk management by more than half. Smart AR solutions will help you measure critical credit risks, match remittance data with invoices and client accounts, and offer advanced analytics for due diligence. You do not have to worry about working with obsolete data as AR solutions can pull in real-time credit risk data from agencies such as Dun & Bradstreet. AR applications can also help you onboard new customers and predict missing remittances. Select AR software that offers multi-variant customer identification features.
Mistake #4: No reminders for past-due invoices Do you think it’s impolite to send reminder notes to customers about their past-due payments? Are you uncomfortable constantly nudging your customers to pay on time? Remember, you need to maintain strong customer relationships while still encouraging clients to follow the payment timelines. Nobody wants their receivables to go uncollected. But some customers will always pay late and have excuses for delayed payments. Customers may even start ignoring calls and emails and you’ll soon get tired of the multiple follow-ups. How can you collect overdue bills while still maintaining healthy customer relationships? How to fix it? Automate your communication strategies Save time by sending automated reminders using an AR application. It will also help you strategically streamline and bucket all your collections. By setting clear, automated communication schedules, you will be able to free yourself from the hassle of sending multiple manual reminders. The software will also send you alerts and notifications for any changes in the collections process.
Mistake #5: Not prioritizing collections from late-paying customers   Customer disputes and delinquent accounts lead to a lot of financial distress. You may also forget about the invoices that need immediate attention. If handled manually, it is hard to identify which customer to call first and the exact amount that needs to be collected from them. This is especially true for companies with multiple transactions and a large customer list. You can’t simply ignore the customers who owe you money for a long time. If you lose sight of your delinquent accounts, your late receivables will never get collected. How to fix it? Be agile in identifying delinquent accounts   For example, you sent the first reminder email asking a customer to clear their dues within the next 30 days. Ideally, you should send the second follow-up email on the 31st day if the bill is still unpaid. Unfortunately, if you’re using manual methods to prioritize collections, there’s a high chance that you may forget to prioritize this customer because you had to chase others. You cannot afford to miss collecting payments like this. AR solutions have features such as correspondence management, customer prioritization, and early dispute identification that help you prioritize delinquent accounts. You can either customize aging buckets in the AR application based on the grace period given or use the pre-curated buckets. Either way you will be able to identify defaulters and recover payments faster.
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