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9 Accounts Receivables Horror Stories And How To Solve Them

18 October, 2021
4 Min read
Rachelle Fisher, AVP, Digital Transformation
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What you'll learn

  • Learn about the cost of holding receivables from finance executives in mid-sized businesses
  • Explore common AR pitfalls and learn best practices to stay on top of critical operations for better bottom-line impact
CONTENT
Introduction
1.  High-Risk Customers Falling to the Dark Side
2.  Poor Reporting and Analytics Cast a Bad Spell
3.  AR Data that Solemnly Swear it's Up to No Good
4.  Remittances Stuck in Web-Portals in the Depths of Azkaban
5.  Defense Against Manual Cash Posting for Checks
6.  The ‘Not-So-Subtle’ Art of Manual Deductions Identification
7.  Brewing Scalable Solutions to Prepare for the Future
8.  The Magic of Digital Payment Methods
9.  The Cursed Chamber of Non-Intuitive Accounting Functions
A Way Forward
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Introduction

Are you a finance executive at a mid-sized business? Have you lived through some terrifying accounts receivables challenges? Many of your peers definitely have!

We have compiled for you some real-world accounting horror stories. We here at HighRadius spoke with multiple SMB finance professionals who shared their accounts receivables (AR) experiences (laced with a pinch of horror).

Let’s go ahead and jump into some scary stories along with a few best practices that can help you keep AR operations at the top of your game and avoid these pitfalls.

1.  High-Risk Customers Falling to the Dark Side

collections customer segmentation

Takeaway: Listening to the CFO of a Fortune 1000 F&B company, it may seem that the woes of receivables are never-ending. This rings true, especially when AR teams are struggling to keep track of critical accounts in the highest overdue bucket. The impact of these overdue invoices could increase Days Sales Outstanding (DSO) if not proactively addressed.

The Potion: De-cluttering the Collector’s Worklist

2.  Poor Reporting and Analytics Cast a Bad Spell

reporting and analytics

Takeaway: The Vice President of a leading Architectural Services firm on the West coast opened up about the need to keep up with the changing pace of reporting requirements. An Excel-based reporting system could be highly tedious, manual, and time-consuming. Most businesses tend to rely on age-old business metrics and data which could prove to be catastrophic for the company. And what good is data if it’s not utilized for strategizing better profit margins?

The Potion: Insightful Dashboard with Crucial Metrics

  • Imagine a dashboard where you could oversee all your critical working capital metrics. Your AR team does not have to manually scavenge through heavy spreadsheets to make data-driven decisions. Intelligent AR automation solutions provide out-of-the-box reporting and actionable insights by analyzing data across your receivables processes.

3.  AR Data that Solemnly Swear it's Up to No Good

centralized AR data

Takeaway: Lost in the wilderness of manual record-keeping methods, the VP of a SaaS company with 100% YoY growth experienced first-hand how poor AR data management practices impact the bottom line. A large volume of scattered data is not much help unless you have the right tools to collate and utilize them.

The Potion: Single Source of Truth for Everyone

4.  Remittances Stuck in Web-Portals in the Depths of Azkaban

web-portal remittance aggregation

Takeaway: An executive VP from an IT firm shared that their AR analysts spend countless hours manually acquiring remittance data from web portals. Manual remittance aggregation is one of the main causes of delayed time-to-cash. As a domino effect, finance teams are not able to focus on other high-value tasks such as credit and collections.

The Potion: Intelligent Remittance Capture to Get Cash Fit

  • Use smart tools to get cash fit: AR automation solutions help reduce manual effort in pulling remittance data from web portals, checks, and emails. Finance teams can better utilize their time on strategic functions as a result.

5.  Defense Against Manual Cash Posting for Checks

manual cash posting

Takeaway: The Chief Operating Officer of an F&B Company highlighted that even if you have an AR team that accurately and quickly posts payments, it’s not enough to cater to the evolving payment behavior of customers. The gist of it is – you may have received the payment but the open invoice has to be closed. This is to ensure that the available credit limit of the customer is adjusted so they are able to place their next order. Analysts need to manually aggregate remittance information from different sources such as emails, checks, and web portals to match payments with open invoices. This is a time-consuming and error-prone process that delays accurate and straight-through cash posting.

The Potion: Embracing AR Automation to Achieve Straight-through Cash Posting

  • Leveraging AI-powered automation tools can help auto-capture remittance data from checks, emails, and web portals and enable straight-through cash posting. Finance teams can sit back and focus on more strategic tasks.

6.  The ‘Not-So-Subtle’ Art of Manual Deductions Identification

deductions management

Takeaway: Unwarranted deductions could prove to be costly if not resolved. We uncovered the consequences of deductions on the bottom line while hearing from the VP of a software company. His words ring true for most mid-sized businesses; manually identifying deductions could affect the net recovery rate due to delayed resolution.

The Potion: Enabling Early Dispute Identification for Faster Resolution

  • Proactive dispute identification will help reduce the resolution time and safeguard you from financial losses. Technology offerings that optimize AR processes can identify deductions at the source. This will help filter short payments or overpayment scenarios to enable early resolution and faster recovery.

7.  Brewing Scalable Solutions to Prepare for the Future

scalable AR solution

Takeaway: Increasing revenue and expanding product lines are not the only critical factors for business growth. The CFO of a computer hardware company opened up about a simple fact – with a rising customer base and demand, you can’t really expect a slow system to perform under a heavy workload. As companies scale and grow – their reliance on ERPs keeps evolving to incorporate additional functional requirements. The question remains, is your business well-equipped to scale with your current ERP system?

The Potion: Adopting an ERP Optimization Platform

  • Automation can help enhance the power of your ERP. With an ERP optimization platform, you can put your AR on auto-pilot and take full advantage of rich functionalities that can scale with your business.

8.  The Magic of Digital Payment Methods

digital payments

Takeaway: For most mid-sized businesses, cash and paper checks are still prevalent but recently, they have taken the back seat. Today, customers prefer the convenience of digital payment methods. The CFO of an East coast based consumer goods service company agrees that customers are not likely to deal with businesses that do not offer multiple payment options.

The Potion: Adapting to your Customer’s Digital Payment Needs

  • Integrating digital payments such as ACH, Credit Cards, wire transfers, Mobile Remote Deposit Capture (mRDC), etc. play a critical role in improving customer experience, along with its added cost savings and efficiency gains. According to Mastercard, 81% of businesses that adopted digital payments say it has improved customer satisfaction levels.

9.  The Cursed Chamber of Non-Intuitive Accounting Functions

non-intuitive ERP UI

Takeaway: Opening up about the usability of ERP systems, the VP of a Brokerage firm shared how finance management systems have a steep learning curve. It is true that one of the invisible bottom line wreckers is the cumbersome user experience within accounting systems. Business agility suffers from silo-ed workflows that hamper smooth AR functioning. Complicated, heavy, and linear user interfaces in accounting systems add to your finance teams’ challenges.

The Potion: Improve Business Agility with an Intuitive UI and Dashboard

  • Adopting a well-designed platform with an intuitive user interface can help finance teams navigate the system smoothly, curbing any potential delays in operations. This also helps improve the dependability and responsiveness of the system. It’s crucial to analyze the usability of the system before considering implementation.

A Way Forward

Simplifying your accounting processes will help you keep your business safe from such frightening experiences. Technology is ever-evolving and provides you with new solutions and answers to avoid such challenging AR situations. Once you pinpoint the processes that can be improved, you can learn how leveraging technology can optimize accounts receivables. While considering AR automation solutions, it’s paramount to make a choice that is best for your business, resulting in streamlined AR processes that are scalable and drive bottom-line growth.

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