Accounts Receivable must be closely monitored because it is one of the leading indicators of a company’s cash flow and liquidity. Failure to track accounts receivable leads to a high DSO. This negatively impacts the financial situation. Accounts Receivable are difficult to track due to the following two factors:
These factors cause high unpredictability in receivables. Hence, companies must be more vigilant in tracking Accounts Receivables during market volatility.
Forecasting accounts receivable is always challenging as it is hard to predict when your customers will pay you. So, even if you raise an invoice on time and communicate the payment due date to your customer, you may not be completely certain whether your customer would make the payment. And, predicting the time when your customer will pay you could be as hard as trying to find a way out of a maze – blindfolded. This challenge is quadrupled in companies using manual AR methodologies. We’ve listed down the challenges in forecasting accounts receivable:
Accounts receivable is one of the drivers that helps in assessing the liquidity and financial health of a firm. Not keeping track of accounts receivable leads to high DSO, thus negatively impacting the financial status. In order to maintain sufficient liquidity, managing accounts receivable at a granular level is a proper way to go ahead. Here are the two effective strategies to manage receivables:
Apart from these techniques, companies should leverage AI to forecast their receivables strategically.
Analytics is not a ‘nice to have’ but a ‘must have’ for businesses today, and it also empowers treasury departments to take proactive and thoughtful cash forecasting decisions. Data efficiency plays a crucial role for treasury teams because delays in data gathering could lead to incoherency in forecasting. The use of spreadsheets and ERPs contributes to such delays. Hence, businesses can leverage AI to improve data accuracy and efficiency, enabling them to analyze cash flow patterns and action cash predictions accordingly.
Here is how AI in accounts receivable helps to generate accurate Accounts Receivable forecasts:
A food & beverage company with a revenue of $25.3 billion leveraged A/R Forecasts with 96% accuracy to track open invoices of 1000+ customers and improve collections. These were the challenges with the previous process:
HighRadius’ Cash Forecasting Cloud provided them with the following benefits:
Using the HighRadius artificial intelligence treasury software, the treasury team can reduce DSO by analyzing payment trends at the region, customer, and invoice levels. Get in touch with our solution expert today to improve A/R forecast accuracy up to 95%.
The HighRadius™ Treasury Management Applications consist of AI-powered Cash Forecasting Cloud and Cash Management Cloud designed to support treasury teams from companies of all sizes and industries. Delivered as SaaS, our solutions seamlessly integrate with multiple systems including ERPs, TMS, accounting systems, and banks using sFTP or API. They help treasuries around the world achieve end-to-end automation in their forecasting and cash management processes to deliver accurate and insightful results with lesser manual effort.