ACCOUNTS RECEIVABLES: A CFO LENS!

ACCOUNTS RECEIVABLES: A CFO LENS!

What CFOs Should Focus On in Accounts Receivables 

1. Strategic Cash Flow Management

  • DSO Optimization: Monitor Days Sales Outstanding (DSO) to identify trends and take corrective action.
  • Cash Flow Forecasting: Integrate AR data into broader cash flow models to improve liquidity management.
  • Collections Strategy: Set high-level policies for collections and align them with the organization's risk appetite.

2. Customer and Credit Risk Management

  • Credit Policy Oversight: Define and refine credit approval processes based on customer risk profiles and market conditions.
  • Customer Segmentation: Analyse AR data to segment customers by payment behaviour and profitability, enabling targeted strategies.
  • Bad Debt Management: Identify patterns of delinquency and create strategies to minimize write-offs.

3. Technology and Automation

  • AR Automation Tools: Invest in platforms that automate invoicing, payment reminders, reconciliation, and dispute management.
  • Data Integration: Ensure AR systems integrate with ERP and CRM tools for seamless data flow and actionable insights.
  • AI and Predictive Analytics: Use AI to predict payment delays, identify risky accounts, and guide decision-making.

4. Policy Development and Governance

  • Payment Terms Standardization: Create policies for payment terms that balance customer satisfaction with financial stability.
  • Escalation Protocols: Define clear escalation paths for disputes and overdue accounts.
  • Performance Metrics: Establish AR KPIs like collection effectiveness index (CEI) and monitor them regularly.

5. Stakeholder Communication

  • Cross-Functional Alignment: Collaborate with sales and customer service to align AR strategies with broader business goals.
  • Investor Updates: Provide AR performance data in investor presentations to demonstrate financial health.

6. Vendor and Partner Relationships

  • Third-Party Collections: Evaluate and manage relationships with third party collection agencies.
  • Payment Gateways: Select and oversee the implementation of payment gateways to enhance the customer payment experience.

What Shouldn’t Pull CFOs Down in Accounts Receivables 

1. Routine Collections and Follow Ups

  • Customer Reminders: Automate payment reminders and follow ups via email or SMS.
  • Collections Workflow: Delegate collections activities to the AR team or third-party agencies.

2. Invoice Creation and Delivery

  • Use invoicing software to handle invoice generation, validation, and distribution.

3. Payment Reconciliations

  • Automate the reconciliation of payments to invoices using tools that support bank integrations.

4. Dispute Resolution

  • Implement self-service portals where customers can raise and track disputes, leaving only escalated cases for the CFO’s attention.

5. Reporting and Data Aggregation

  • Delegate the preparation of AR reports to finance analysts and ensure systems generate real time dashboards for instant access.

6. Manual Credit Assessments

  • Automate credit risk evaluations using machine learning models that consider historical payment patterns and external credit data.

To see AR Automation in action, book a demo – sandeep@inebura.com

Author

Sandeep Handa
Sandeep Handa
Pontem Integrated

Sandeep Handa a.k.a. Sandy, is a marketing communications leader with more than 25 years of experience across various global & local advertising agencies and industry verticals. He has worked on many a prestigious brands, like adidas, Luxor, JK Tyre, Maruti Suzuki, Lay’s, Mortein, Hitachi, NIIT, PVR Cinemas, Nestle Chocolates, Uninor, HCL to name a few. Before venturing out on his own, Sandy was the Head of Delhi Office for Bates CHI & Partners. He is an amateur artist, and an up coming off roader who loves to drive in the hills.

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