We all know that the accounts receivable (AR) process is an integral part of all sales transactions which are credit-based. Managing accounts receivable is vital to ensure that invoices are sent and the payments are collected once the goods or services are delivered. But that’s not all.
The process of managing the complete process from order to cash, which includes credit onboarding, invoicing, collection, cash reconciliation, and deduction management is called AR management.
Accounts receivable management starts as soon as the sale is finalized because that is the time the AR team steps in to assess the customer and onboard them for credit transactions. However, the process of AR management continues throughout the lifecycle of a B2B customer. The various stages include credit assessment and onboarding, invoicing, reconciliation, deduction management, and more.
Proper accounts receivables management will ensure that your cash flow is healthy, the team is happier, customers are satisfied, and expenses are low. However, managing accounts receivables is not easy and needs careful planning and resource allocation.
The way you manage accounts receivables affects many areas of the business. These include:
The rate at which you are able to collect receivables from your customers has a direct impact on your cash flow. When receivables become slow, your cash flow is affected adversely.
Your accounts receivables management has a direct impact on the way customers view you. For instance, if your AR team keeps contacting a customer even after payment is made, it is bound to irritate them. Or if you expect payments from customers without sending invoices to them on time, this can become a negative factor too.
Often much of your AR team’s time is spent on sorting through the payments received and applying them to the relevant accounts. In the absence of a proper system to do this, it can be a time-consuming and erroneous process.
When your team is unable to manage your cash flow, support good customer interactions, and spend much of their time on cash application, it is bound to have a domino effect. With poor cash flow, you will be unable to pay your suppliers and this affects your ability to deliver goods or services as provided, which can damage your reputation.
Some of the common issues that affect accounts receivable include:
There are many aspects to accounts receivable management, which include credit onboarding, invoicing, collection, reconciliation, and dispute resolution. The tips given below will cover a single aspect or more than one.
When it comes to invoicing, there are two aspects that you need to get right. One is to ensure that the invoice goes out on time and as per the agreed terms of payment. When you have a cadence for invoice delivery, the customer will start anticipating it and make arrangements to pay on time.
Another aspect that you need to get right is the tone of your communication when you send the invoices over to the customer for payment. Make sure that your invoice is not cluttered but contains all the details. The email content accompanying the invoice needs to be clear and concise while remaining polite.
You will find that many of the deficiencies in the collection occur because the customer is not happy with aspects of the post-sales support. While this tip does not completely apply only to your finance department but to all customer-facing teams, it is critical to ensure that your post-sales setup is robust. As part of the finance team, you can ensure that all the documentation related to the sale (before, during, and after) is sent to the customer on time. Post the sale, you can also ensure that the invoicing process is streamlined with attention to detail.
Businesses worldwide have started seeing value in digital transformation in critical processes. One of the processes that will definitely benefit from automation is accounts receivable. When you automate your accounts receivable, the process becomes quicker and leaves no room for manual errors. Accounts receivable automation keeps track of invoicing, collections, and patterns to look out for, but it also ensures that your employees can focus on more strategic work.
Often the root cause of your collections and cash flow issues is simply a matter of poor internal processes. One of the easiest ways to mitigate the constant issues that the sales department and the AR team have is to make clear internal processes. Make sure that each of the teams understands the end objective of the other. Sales will focus on getting orders and the finance team will ensure that the customer is financially sound enough to warrant credit term. However, it is equally critical for each of the teams to support the other in these processes.
Whether it is internally or externally, one of the crucial tips is to follow is to ensure two-way communication. This may seem like an obvious factor, but it is often ignored, especially when it comes to the finance team and customers. Enable easy-to-use and numerous options for stakeholders—both internal and external to interact in the way they choose to.
One of the ways to ensure efficient accounts receivable management is by enabling your customers with many options to pay. Doing this will ensure that your customer can make payments even if the authorized person is traveling. Often customers will balk at making the payment because they have to move away from what they are doing to the option provided. But by enabling more options, you are making it convenient for your customer to pick the option that works for them at that point in time.
In B2B business transactions, especially ones that involve delayed payments, quality can become an issue. By quality, we mean not only the quality of goods or services delivered but also the quality of interactions that customers have with your organization at all touchpoints. Make quality a priority at all levels, whether it is on the shopfloor, transportation, inventory management, or the finance department.
At HighRadius, our team of fintech experts works with different businesses to understand their specific needs and offer solutions that will help you manage AR with ease. Our solutions cover all aspects of accounts receivable management, which includes credit assessment and onboarding, invoicing and collections, cash reconciliation, and deductions management.
What is more our solutions also offer insights into customer behavior to anticipate and resolve problems before they become bigger. Our portfolio of accounts receivable software includes solutions for companies of all sizes.
Automate invoicing, collections, deduction, and credit risk management with our AI-powered AR suite and experience enhanced cash flow and lower DSO & bad debtTalk to our experts
The HighRadius RadiusOne AR Suite is a complete accounts receivable’s solution designed for mid-sized businesses to put their order-to-cash on auto-pilot with AI-powered solutions. It leverages automation to fast-track key accounts receivable functions including eInvoicing & Collections, Cash Reconciliation, and Credit Risk Management powered by RadiusOne AR Apps to improve productivity, maximize working capital, and enable faster cash conversion. Affordable, quick to deploy, and functionality-rich: it is pre-loaded with industry-specific best-practices and ready-to-plug with popular ERPs such as NetSuite and Sage Intacct. The HighRadius RadiusOne AR Suite is designed to automate labor-intensive processes while streamlining credit and collections activities for faster AR processing, better cash flow and improved profitability.
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