An insightful summary of the essential skills required to steer your accounts receivable in the right direction while climbing your career ladder at the same time!
As an AR professional experiencing digital transformation in an ever-changing economic environment, its important to not just stay relevant but also excel in your domain. This unanimous sentiment was also echoed in one of our recent surveys, take a look:
✓ 53% of the A/R professionals surveyed consider understanding the transformation of A/R processes with new technologies such as AI and RPA to be the next big skill that they need to acquire.
✓ 26% believe that leveraging data analytics and reporting can help them slice and dice their accounts receivable to know the real issues.
✓ 16% believe that developing a robust credit process and collections policy framework can help them rudder their accounts receivables in the right direction (away from bad debt!)
✓ 5% believe that defining a stringent collections strategy would be a key transformation in their A/R space.
Keeping in mind these requirements of all the credit and A/R leaders, we have summarized the 5 key essential skills that any A/R personnel would need to excel in order to climb their career ladder. The following chapters describe these essential skills and what needs to be done to excel in each.
Understanding Credit and Collections Laws
Understanding commercial debt collection laws are critical, especially for those businesses that extend credit to international customers. Knowing what language to use in dunning correspondence and what law to look for in order to file a lawsuit can both help in debt recovery and shield the company against any lawsuits for inappropriate collections practices.
Customer Segmentation and Correspondence Strategies
Still wondering which customers to call, what correspondence method to use, and how to track the communication? All you need to do is go through this chapter for a crash-course on how to correspond with the right customers at the right time.
Developing a Credit Policy Framework
Under the burden of bad debt and uncollectible receivables? Here is the solution. Learn how to develop a robust credit and collections policy framework to reduce credit risk exposure while extending lines of credit to strategic accounts and SMBs.
Reporting and Analytics
While it is essential to keep driving the processes and implementing new technologies to earn better results, it is more important to analyze process performance and KPIs and change course accordingly. An advanced reporting A/R dashboard could help you and your executive teams keep track of DSO, bad-debt, and customer profitability.
Understanding Latest Technology
Still unaware of fifth-generation technologies, such as Robotic Process Automation and Artificial Intelligence, and how they are revolutionizing the A/R landscape? This chapter is all about the application of advanced technologies to fundamentally transform credit and A/R operations.
Bad debt is inevitable regardless of the industry or size of an enterprise. According to the “Financial Accounts of the United States,” September 21, 2017, Federal Reserve
Statistical Release, the amount of debt is approximate:
This certified data is enough to torture faint-hearted executives and drive the credit and collections team into a frenzy. However, the credit and collections team could alleviate this problem by understanding the various credit and collections laws that govern debt collection practices. Incorporating fair debt collection practices into collection processes is the first step to recover past due.
All about which customer to call and when
Customer segmentation refers to the strategy of dividing customers into groups based on specific characteristics with the goal of refining a collections strategy to improve collection rates.
Segmentation characteristics may include:
A credit policy is a set of guidelines that:
A credit policy is an encapsulation of how risk-averse a company is regarding the extension of credit.
Streamlining the entire end-to-end process of assigning credit and collecting receivable can be effectively guided by a 5-point credit and collections framework. It consists of the following 5 processes:
Setting authorization levels for all A/R managers, analysts, and executives is an integral part of the credit policy. Although they differ from company to company, some common examples of roles and responsibilities of different A/R leaders are:
Strategic planning for all basic tasks, including assigning credit limits and implementing a dunning strategy, still plays a crucial role in the A/R space. Therefore, it should be part of the credit policy.
Table 1 shows a strategic plan on how to determine the creditworthiness of a new customer based on :
Table 2 describes three different portfolios of customers and the correspondence approach that could be followed based on Aging and due amount. The sample table uses the following set of simple steps to select the dunning strategy:
After finalizing the mission statement, credit goals, and the roles and responsibilities of A/R workforceand setting up the strategic procedures for all essential processes, now it is time to measure your results!
Here is a to-do list that every credit and A/R leader must follow to get the most accurate measurement of its accounts receivable:
Just three steps and you are ready with a revised credit policy that will give you better results.
However, there is another common question here: What metrics should I use?
Here are the metrics that should be tracked while making a monthly collection of individual performance scorecard :
In today’s complex dynamics, managing accounts receivable without reporting and analytics is like driving a car without having the slightest idea how fast you’re going. Therefore, it is essential to have an accounts receivable dashboard that quickly translates the company’s objectives into measurable metrics.
According to a survey by HighRadius, reportsare commonly made with these tools:
It generates the same set of reports for all users!
Be it a finance executive, a functional manager, or a process analyst, ERP provides the same reports to all users without considering their needs or requirements.
Not only ERP, but most of the reporting tools including spreadsheet-based processes, BI tools also do not customize the reports based on the A/Rpersonnel’s need.
An ideal accounts receivable dashboard provides instant access to both basic and advanced data elements to help execs and process owners better understand the current state of their receivables to drive progress towards organizational goals.
It should be able to provide the following critical information as required for each of these report consumers: –
Overall A/R impact on finance strategy
Individual performance and customer data
Robotic process automation (RPA) is the application of technology that allows software “robots” to mimic human actions on a computer to complete a business process
Artificial Intelligence(AI) is the ability of computer systems to learn, reason, think, and perform task requiring complex decision-making
Yes. Those are the things on the horizon that are going to completely change the outlook of accounts receivable in the next two years!
Here is a quick overview of what you need to beat the odds, accelerate your growth, and drive your A/R which is as advanced as Tesla:-
Acquiring these skills can help leaders and pioneers across the credit and A/R space regardless of their individual job roles reach to the pinnacle of their success while delivering top of the class results.
On another note, want to know what beyond the curve technologies look like?
Turn the page.
HighRadius is a Fintech enterprise Software-as-a-Service (SaaS) company. The HighRadius™ Integrated Receivables platform optimizes cash flow through automation of receivables and payments processes across credit, collections, cash application, deductions, electronic billing and payment processing.
Powered by Rivana™ Artificial Intelligence Engine and Freeda™ Virtual Assistant for Credit-to-Cash, HighRadius Integrated Receivables enables teams to leverage machine learning for accurate decision making and future outcomes. The RadiusOne™ B2B payment network allows suppliers to digitally connect with buyers, closing the loop from supplier receivable processes to buyer payable processes.
HighRadius solutions have a proven track record of optimizing cash flow, reducing days sales outstanding (DSO) and bad debt, and increasing operational efficiency so that companies may achieve strong ROI in just a few months. To learn more, please visit https://www.highradius.com/.
Integrated Receivables optimizes accounts receivable operations by combining all receivable and payment modules into a unified business process. The Integrated Receivables platform provides solutions for credit, collections, deductions, cash application, electronic billing, and payment processing – covering the entire gamut from credit-to-cash.
The HighRadius™ Integrated Receivables platform stands out by enabling every credit and A/R the operation to execute real-time from a unified platform with an end goal of lower DSO, reduced bad-debt, and faster dispute resolution while improving efficiency and accuracy for cash application, billing, and payment processing.
HighRadius™ Integrated Receivables leverages Rivana™ 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. The Integrated Receivables platform also enables suppliers to digitally connect with buyers via the radiusOne™ network, closing the loop from the supplier Accounts Receivable process to the buyer Accounts Payable process.
HighRadius Autonomous 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. Autonomous 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.