Reforming Accounts Receivable Collections Strategy for CFO’s Office

Let’s say that you lend $1000 to your friend who promises to return it in one month. Now, a month has gone by and yet your friend hasn’t returned your money, despite your repeated requests. How will this impact your finances and moreover, how will this episode impact the relationship with your friend? Crucial questions to ponder! Let’s expand this use case to your business. You onboard a customer with a renowned brand name, strong market leadership, and a large customer base. Based on these indicators and the rapport built by your sales team, you offer a larger line of credit as compared to your other customers. Now it’s time for them to pay up, and you follow protocols by raising an invoice, informing the date and terms of payments, and the implications of failing to make the payment after the due date. The date of payment has come and gone, yet no money in the bank! Your countless follow-ups result in myriad excuses from ‘it’s in the mail’ to ‘it’s in process.’ Your collections team is now stuck with a customer who may either bounce the payment or may pay late. Either way, it will affect your cash flow! Hence, CFOs must never be disillusioned by assumptions or preconceived notions about any client account however renowned or big they might be. It is said that by failing to prepare, you are preparing to fail. This adage resonates with the many finance leaders that we interacted with. You must create a failsafe collections strategy and get actionable insights to aid intelligent customer segmentation. Here’s what mid-market CFOs should do to ensure an unbiased and seamless debt collections process: 1. Get your collections strategy right to ensure optimum cash flow throughout the year ‘Most mid-market businesses fail to look at their accounts receivable till it’s too late.’ expresses Lawrence Chester, President, CFO Simplified. And we couldn’t agree more. The CFO’s office is trained to have the mindset of tackling problems as they come instead of taking a measured approach to why these problems occur. Hence, the collections team may invariably reach out to customers who could be over 30-45 days late on their payments. The continued collections persistence to an incorrect customer segment may lead to loss of valuable bandwidth. Furthermore, it could lead to the dilution of CX, leading to the loss of future business opportunities. By applying a thought-through collections strategy and employing the best practices in collections, the CFO’s office can identify areas within the accounts receivable spectrum that are critical and require attention. Through real-time AR monitoring, the collections team can mitigate lost opportunities to collect cash, as well as plan their correspondence well in advance. This helps avoid bottlenecks caused by collectors’ focussing solely on making calls to customers. A planned approach can ensure businesses have adequate cash flows that can be used for other vital processes like inventory management and payroll. 2. Conduct periodic reviews apart from collections to optimize your day-to-day AR process With the right collections strategy in place, the next step is to ensure regular monitoring of the AR processes. Assign a resource to review all the invoices and apprise the CFO’s office of any critical cases that require immediate attention. Establish a correspondence mechanism that makes it easier for your team to send reminders to customers in a way that isn't curt or inconvenient. The collections team should also take notes on how customers react to the team’s correspondence methods so that they can amend their approaches accordingly. 3. Establish a strong credit policy for better control It can often be difficult for mid-market CFOs to predict which of their customers will default on payments. The chances of even the most disciplined customers becoming delinquent are not unlikely, given the current, highly erratic economic climate. On the other hand, businesses that pay a day or two late are often considered by collections teams to have gone under. The reality, though, might be that they are only taking a few days extra to sort their finances. To account for varied instances of this sort, the CFO’s office must have a strong credit policy in place that takes into account all the different factors including market conditions and clients’ promise to pay. A well-defined credit policy enables customers to have some leeway while ensuring that all possible scenarios are accounted for in the credit policy. This vastly improves customer acquisition as well as the CX. Read this blog to get tips for designing a sustainable credit policy. 4. Know your customer Customer segmentation allows collections teams to plan correspondence and customize it according to different customer profiles. It enables the team to maximize collections and simplify customer communications. For example, by segmenting customers, you can identify low-risk customers who needn’t be sent too many reminder emails. You’ll also know your high-risk customers, whom you’ll need to actively engage with dunning techniques. 5. Leverage automation to streamline collections and improve CX Mid-market CFOs are realizing the efficacies of automation in their AR strategy, as it –

• Eliminates manual processes
• Simplifies AR complexities
• Eases customer onboarding
• Infuses artificial intelligence in collections
• Helps manage customer correspondence
• Drives cash flow
• Reduces the number of delinquency cases
• Delivers exceptional CX

With CX now a priority for businesses today, mid-market CFOs can deliver seamless CX by integrating automation techniques in their collections process. RadiusOne by HighRadius is a powerful AI-based solution specifically designed for the mid-market business. The solution not only helps simplify the AR process for CFOs but helps personalize the collections and correspondence strategy for customers. It also helps add more value to your customer relationships. RadiusOne comes with native voip calling and automated correspondence that lets the collections team customize their message. The self-service portal allows customers to track their pending invoices and pay via their preferred payment method, helping elevate the CX. Reduce your DSO by partnering with HighRadius, and take the next step towards implementing intelligent AR processes. Get in touch with our AR experts for a demo today!