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.
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:
An efficient collections process – one with the least DSO and minimum Bad Debt – leads to higher gross margins for the company.
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:
Not knowing about the A/R operations, it is difficult to figure out what corrective actions need to be taken.
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.
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.
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.
Sample GAP Analysis For Cash Allocation Automation
Conducting Periodic Performance Reviews for A/R Teams Working Remotely