Building a Customer-Centric Mindset Across the A/R Team Proven Tips to Safeguard Cash Flow

To curb the impact of the evolving business dynamics, finance organizations globally are trying to come up with innovative ideas of operations to stay relevant in the market today. Companies like Apple, Netflix, Amazon, Airbnb, and Uber caused a significant disruption in their respective industries – and the one thing common between them is a customer-first approach to doing business.

While all of these are Business-to-Consumer (B2C) companies, it won’t be long before buyers in the Business-to-Business (B2B) space would start expecting the same from their suppliers. To meet the CFO’s goals of improving the cash flow, A/R leaders also need to go above and beyond and work with customers to get paid faster and reduce the volume of outstanding receivables.

Being a customer-centric function doesn’t mean A/R teams need to meet every demand the customer keeps on the table. It implies that A/R teams should listen to them, understand their needs, and then work with them to achieve a mutual ground that serves both parties’ interests. But A/R leaders need to overcome a few roadblocks to inculcate this mindset across all the teams.

What stops A/R teams from adopting a customer-centric mindset

Here are three most commonly understood challenges that stop A/R teams from progressing towards providing customer experience:

  1. Lack of organizational incentive for A/R teams to focus on customer satisfaction:There is a general notion that maintaining customer relationships is the sales team’s job. Hence, A/R teams deprioritize it, as it doesn’t directly fall under their KPIs.
  2. Lack of integrated systems causing limited visibility across A/R teams:A/R teams working in silos with disintegrated systems, often across geographies, are unable to interact and work together in real-time, resulting in poor customer experience in the long run.
  3. Inability to focus on customer experience due to bandwidth constraints:Even if A/R teams are motivated to deliver a good customer experience there, bandwidth doesn’t allow them, because most teams have to deal with more transactional tasks daily.

Three-ways A/R leaders can develop a customer-centric mindset across the team

1. Pivoting the credit and collections strategies

A/R leaders need to start by optimizing their core process, i.e., credit and collections, and rethinking the strategies around customers.

  • Having control over credit is critical to recovering from the turbulent economic climate’s impact. A/R leaders need to ensure the team performs intensive background research on every portfolio and double-checks them before onboarding the customers.
  • Performing frequent credit reviews over a particular portfolio, checking for risk alerts. A/R teams can proactively upgrade/downgrade the credit limits for customers as per the conclusion drawn from the reviews even before the customer requests it.
  • Streamlining the existing approval workflow process without having to run the same thing with multiple stakeholders.
  • Researching how the customers fared and learning how this crisis has impacted them can prove highly effective. A/R teams can use this intel to devise new payment terms for them accordingly and offer alternatives that suit the interests of both parties.
    For example: if some of the customers have been paying on time earlier but are now delaying their payments, then offering them an early-payment discount as an incentive will help fast-track the payment cycle for the pending payments owed.

2.Improving the relationship between the A/R & the sales teams

A/R leaders need to focus on an A/R + Sales ecosystem to make not just sales, but profitable sales in a way that bolsters the cash flow and provides customer delight-

  • Through the credit research tools, teams should be collecting insights about customer behavior and checking if they have been growing. This would help leaders understand their profitability.
  • Sharing this vital information with sales is a proactive way for the sales team to expand a selling opportunity to these kinds of customers. This turns the credit department into an invaluable partner for sales facilitation and expansion, and they can provide the customers with what they really need.

3.Investing in a more know-your-customer (KYC) approach

  • Keeping the customers close is the key to building a lasting partnership valuable to both the A/R team’s objectives and the customers.
  • Evaluating and estimating the customer’s potential before teams resume or even begin doing business with them is critical.
  • Studying and evaluating the crisis’s impact on the customers will help teams stay ahead of their behavior.
  • Using this knowledge, they can also estimate when the customers would be in a position to make accurate and timely payments.

Conclusion

According to Salesforce, attracting a new customer is 6-7 times more expensive than retaining a current one. Hence, the most effective way to reduce Days Sales Outstanding(DSO) would be to channel the A/R teams to adopt a more customer-centric approach going forward. The shift towards becoming a customer-first function might be challenging and a long-term process, but it is definitely an essential step towards improving cash flow and customer retention.

Kevin Permenter from International Data Corporation (IDC) also has similar thoughts on how A/R teams should leverage technology to improve staff utilization and focus more on delivering exceptional customer experience and improving cash flow.
IDC on Why 85% A/R Transformation Projects Fail

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HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.