When your business is running smoothly as far as operations are concerned, and also generating a lot of sales, you tend to assume that everything is hunky-dory on the financial front. However, despite their increased revenues, many businesses continue to find themselves in a difficult situation. The reason is simple – many businesses are not able to recognize the fact that with businesses growing, there are other aspects of their organization that are expanding as well. There are now more customers, more employees, more transaction costs, more inventory to manage, more stringent compliance standards, etc. etc. that are driving up overall expenses.
Till the time businesses escape the ‘spend money to make money’ trap, they need to concentrate on important non-operational issues, such as increasing working capital and cash flow; or else businesses can get into serious trouble. Accounts Receivables (AR) are the major source of working capital, but also a major problem area for most businesses especially when it comes to managing more invoices and more clients when the business expands or grows.
With fewer clients, it’s easier to maintain contact with customers and also keep track of due dates, however, as the company grows and more clients are added, things get complicated and the chances of invoices falling through the cracks increases. This leads to delayed payments and bad debts that, of course, will impede not only cash flow, but also future growth.
Below are five things that businesses can do to ensure improvement in Cash Flow:
1. REGULAR CREDIT CHECKS, ON EXISTING, AS WELL AS NEW CUSTOMERS:
Every customer is unique and hence each customer needs to be treated differently. It’s not a wise decision to issue credit to every customer, nor it’s wise to set the same credit limit for every customer, and nor it is wise to have the same credit terms for each.
So to ensure minimum bad debt and consistent cash flow, It’s absolutely crucial to conduct a thorough research. Every business should use a Credit Application to undergo credit checks and to asses a customer’s creditworthiness, and that too on a regular basis. A customer might be in a good position not, might not be in the future. The point being that businesses should ensure that customers complete a new credit application when they approach you for a credit limit or when they approach you for revision in credit terms & conditions.
2. ROBUST FORECASTING:
Estimating the outcome from an AR perspective is far more difficult than estimating the same from an AP perspective. While businesses can always determine when their open receivables are due, it is difficult or sometimes next to impossible to predict whether the payments will be received on time. Most businesses estimate their AR using an average DSO, however it is possible for businesses to predict by knowing their customers’ payment history and payment pattern. And an Account Receivables Software can really help here as it analyses customer payment behaviour and uses analytics to predict precisely.
3. ADHERENCE TO LAID DOWN GUIDELINES:
It is always a great practice for businesses to put in place processes, policies, and action plans for each and every phase of the Accounts Receivable Process, from putting in place credit policy or policies, action to be taken for different aging buckets, strategies for top portfolio customers, invoice reminder rules, dispute management & escalation protocols, SLAs, and TATs This helps AR Teams to determine expectations regarding the laws, rules and processes. And moreover, it ensures that sales teams and AR teams follow established protocols that helps the business maximize their assets, lower their credit risk and ultimately enhance cash flow. Another positive implication is that, the policies and protocols empower AR teams to be proactive, plan better and boldly address issues and swiftly respond to inquiries that creep up. Isn’t this the aim of an effective AR Management Process!
4. DEPLOY NEW AGE AR TRANSFORMATION TOOLS:
Currently to manage Accounts Receivables, most companies have teams that manually use a combination of their ERP, spreadsheets and CRM. This manual process is, not only, highly error prone, but it just makes the process chaotic as the teams find themselves spending a lot of time to figure out where a mistake occurred and what went wrong. The teams land up trying to solve an issue and not proactively spend time in actually working to collect the dues.
This is where AR Automation and its transformative dashboards and tools can make the process easy and simple by helping the teams to clearly map the invoice-collection lifecycle with automatic submission of invoices, customized scheduling of reminders, and insightful actionable insights.
5. CUSTOMER SELF-SERVE PORTALS:
Businesses can ensure faster payments by providing their customers the opportunity to verify their open invoices and also communicate with the AR teams by adding their comments, if any, against the open invoices. Also, putting in place to make online payments makes the customers pay faster and that too with just a few clicks. And AR Automation tools will help businesses to do precisely that.
To know more how AR Automation can help transform your AR Management Process. You can connect with us. Visit www.inebura.com or write to sandeep@inebura.com to book a demo.
ABOUT INEBURA:
Inebura, a cutting-edge SaaS platform to manage your Accounts Receivables, helps you stay on top of your collections process, ensures consistent cash flow and lowers bad debts. It comes API ready, SFTP-ready and also comes preloaded with multiple customizable dashboards, innumerable functional modules, and customizable templatized AR inputs. Further, it also has an Email-integrated Dispute Tracker Module, Customized Screens for Customers, Pre-loaded Schedulers, WhatsApp & Email Templates, and One-click Bulk Reconciliation of Invoices. It can seamlessly integrate with your existing ERP and easily help you take complete control of your receivables, lower the cost of funds, ensure a healthy working capital situation and much more.
Inebura comes from the pioneers of B2B AR Management in India – TanServ Business Process Pvt. Ltd. – and is a result of their 12+ years of experience in managing AR for many Fortune 500 companies.