The Relevance Of Compliance In Account Receivable Management

To make sure that all the nodes in the Account Receivable life cycle are done in accordance with recognized standards, compliance is used. Compliance establishes a norm to prevent fraud, dishonesty, and misconduct.

To ensure compliance, one must abide by internal corporate policy and also the law. It regulates all processes and transactions.

This blog will discuss the importance of compliance action, compliance standards, how it affects businesses, and the best ways to achieve compliance.

TWO METHODS TO ACHIEVE COMPLIANCE:

1. Establishing a standard
2. Making sure the business follows it.

STANDARDS FOR COMPLIANCE

It is a collection of process, financial and accounting-related laws, regulations, and policies. It maintains accounting receivables procedures' consistency and dependability and is also a subset of the compliance standards for overall accounting and finance of the business which preserves the continuity and reliability of accounting practices. Compliance standards prove to be essential when implemented and adhered to by all departments.

A company must know why it must comply and what potential benefits there may be.

An organization ought to consider the following considerations before putting the Compliance standards into effect:

1. The requirement for conformance.
2. The repercussions of not complying.
3. Standards that are relevant to the way the business operates.
4. Benefits for the company

The Significance of Compliance

Your business gains from adhering to financial compliance requirements in a variety of ways.

Following all relevant rules and guidelines will save your company money and time in the long run e.g. if there is a compliance guideline of sending reminder mails to your customers every 10 days after invoice date and the same is followed then there is a higher probability of collection for the invoices(s) within due date

Your chances of getting fined will be reduced because you'll have an exact way to keep track of transactions.

Following account receivable compliance guidelines will help you identify issues before they get out of hand e.g. if you have a dispute resolution guideline with defined TATs and an auto escalation matrix then there is again a fair chance that you will be able to achieve both customer satisfaction as well as collect for your portfolio within time. One more example, you may notice that your company is having problems with cash flow. When you delve into the issue you see that the DSO is above the standard norms. With that information, you may determine the underlying source of the issue and devise a strategy before your company suffers a loss.

Maintaining compliance standards also helps keep your business out of legal hot water. If your company violates the standards' obligations for maintaining the privacy and confidentiality of your clients' financial information, such clients may take legal action against you. A lawsuit can be costly financially and in terms of time lost for your organization. It takes a lot less work to follow the law and the regulations than it does to try to undo the damage caused by penalties, legal issues, and bad press.

IMPLEMENTING COMPLIANCE MEASURES

Compliance actions are the steps a company takes to make sure it complies with all applicable laws and regulations. This includes everything from developing compliance procedures and regulations to training employees on how to adhere to them. By taking a proactive approach to compliance, businesses can identify and address potential compliance challenges before they turn into legal issues. Compliance action is essentially about taking a proactive approach to compliance and with automation tools like Inebura you can enforce these standards into the workflow as well. By identifying such issues before they arise, businesses can avoid significant financial loss and damage to their reputation.

The Benefits of Compliance Standards:

1. It improves the standing of your company in the industry.
2. It will identify issues and act before they cause harm.
3. It offers accurate details regarding the financial status at any given moment.
4. It will shield the company from potential legal issues arising from non-compliant businesses.
5. It ensures a precise way to keep an eye on every transaction.
6. Long-term financial and time savings are realized together with enhanced stability.
7. The financial system protects the security and privacy of the company's data because it has password protection and restricted access.
8. The business functions efficiently when policies and procedures are followed.

Top compliance techniques

1. Understanding the standards
2. Train the stakeholders
3. Detect Deviation
4. Last, but not the least, pick the proper technology which enables all stakeholders to either operate, review or audit on the same platform.

Documenting your procedures and policies is one thing. This does not, however, mean that your employees follow these protocols or are as productive as you would like them to be. So, an AR management tool like Inebura has an inbuilt compliance strategy which is customisable. It also throws insightful dashboards, reports, emails as well as  WhatsApps to the concerned auditors/ managers as well as  keeps audit trails to highlight deviations so that corrective measures can be taken.

To know more, write to sandeep@inebura.com