Β 

13 A/R KPIs Every Finance Exec Must Track


This e-book unveils the 13 most effective KPIs that will help you identify key areas to optimize working capital and improve profitability. The e-book is a culmination of research of more than 500 credit and A/R and finance initiatives to improve free cash flows and net profit.

Contents

Chapter 01

Accounts Receivable for Finance Executives

Chapter 02

A/R Metrics Every Finance Executive Must Track

Chapter 03

Summary

Chapter 04

About HighRadius
Chapter 01

Accounts Receivable for Finance Executives


The Executive Agenda: Leveraging A/R to Improve Working Capital and Cash Flow

Why it is important to leverage A/R for healthy financial operations

Working capital and cash flow directly influence day-to-day operations. A/R has a direct impact on the liquidity of a company as highlighted in the following examples:

  • Past due to A/R impacts the profitability of the company. When past-due A/R become uncollectable it has to be written off as bad debt, thereby reducing liquidity
  • Slow turnover of accounts receivable means that the company has to borrow from the banks to fund day-to-day operations. This has a negative impact on profitability given that companies have to pay back banks interest for their borrowings

An efficient collections process – one with the least DSO and minimum Bad Debt – leads to higher gross margins for the company.

Challenges in Managing A/R as a Finance Executive

Lack of visibility into performance

The most evident pain-point of A/R processes is getting a grasp on what is going on. Due to a lack of standardized business processes, it is difficult to monitor the performance across processes. There is no transparency for tracking the productivity of analysts. Finance Execs cannot track:

  • if the credit team is setting the right credit terms
  • the amount that turns into bad-debt
  • if the collections team is collecting on time
  • the volume of invalid deductions and write-offs

Not knowing about the A/R operations, it is difficult to figure out what corrective actions need to be taken.

Lack of visibility into productivity

Sometimes only observing metrics doesn’t give the entire picture into the productivity of the processes. In the case of a high DSO, to identify if its origin is associated with collections or credit, it is necessary to drill-down on the productivity of each process.

Unclear understanding of what to track

Executives are busy and need to look at the end to end performance of finance and not just individual functions. They are often burdened with too much information which leads to analysis-paralysis. Hence, monitoring metrics that are suited to their own domain of business, business size and industry is paramount to run the business profitably.

Lack of access to real-time insights

Reporting is usually time-consuming and is done once in a month or a quarter. Plenty of time and resources are lost just to collate the data and prepare reports, but by the time the reports come in, the executives are in essence dealing with data that is at least a few weeks old.

Running a business is increasingly complex and finance leaders need to be up to date on the latest data and be nimble enough to apply course corrections without waiting for the quarter-end or the year-end. Real-time data on working capital, cash conversion cycle, DSO and bad-debt should be readily available without depending on analysts to prepare reports.

Recommendations


  5 min

Sample GAP Analysis For Cash Allocation Automation

Abstract

This ebook outlines the necessary steps for GAP analysis, showcasing the intricacies of the scoring model and vendor evaluation for the proposed automation project.

  5 min

  45 min

Conducting Periodic Performance Reviews for A/R Teams Working Remotely

Abstract

With the switch to a remote working environment, A/R managers are trying their best to ensure high team productivity and delightful customer experience. In this uncertain economic environment, it is important to stay…

  45 min

  45 mins

A Glimpse: Digital Order to Cash with AI-Powered Digital Assistant Freeda

Abstract

What will be covered in the session: β€’The buzz around digital transformation β€’Wait, before you move ahead with a digital transformation venture, you need to avoid these 3 mistakes β€’What AI can do…

  45 mins