Is Failure Actually Success In Progress? Reasons For A Failing AR Strategy

The best Accounts Receivables Strategy involves tracking of open receivables before they become delinquent and cause severe cash flow problems. So, if your organization is facing cash flow issues, you know your AR strategy is either falling short or failing. So proper steps need to be taken, however, before you start to solve this issue, you need to understand what and where things are going wrong.

Below are some key reasons for a failing AR Strategy:

1. LACK OF STANDARDISED PROCESSES:

Lack of a formal, watertight, and standardised AR Management Plan is a guarantee of ineffectiveness. The effectiveness is further compromised by tedious and mundane manual processes; random follow-ups, addressing ad hoc issues and then desperately trying to connect the various dots to pinpoint the issue. This, instead of pinpointing the issue, actually results in a lack of clarity and a complete defocus from the major objective.

The correct approach is to immediately, and on priority, list down all the major nodes in the process along with all the possible roadblocks. And secondly, put in place a Dispute Management Process. The point is that you need to put a system in place and make all the efforts to ensure that it is implemented and ensure that the policies and procedures are effectively carried out by also putting in place a tracking mechanism that measures milestones and achievements at regular intervals. Doing all this will definitely lead to reduction in time & effort, and of course Cash Flow.

2. LACK OF OWNERSHIP OF THE AR PROCESS:

Ownership points to the importance and the significance of having a Credit Policy in place with a clear mention of the person or persons responsible for every aspect. This also puts in a implementation roadmap of best practices. Further, within the AR Process, there has to be clearly designated roles for different phases/ stages of the AR Process. These clearly designated roles make people accountable for any breach in the SLA, or, even for disputes, or any other slack that might creep into the process. Here too, the starting point should be the identification of the key nodes, followed by assigning accountability for each node so that, through tracking, you can discover and sensitize the laggards and/ or reward the achievers.

3. YOUR STAFF IS UNDERTRAINED IN DOMAIN EXPERTISE:

Many businesses, particularly SMBs, entrust office managers or part-time clerks with the task of collecting debt because they lack a dedicated AR Management Team. And so, it’s crucial that the personnel possess the skills, have the resources, and are trained to make a positive impact during every customer interaction regarding collections. Here the use of technology and AR Automation can really make that required impact. It will help reduce your dependency on manpower by automating many of the sub-processes, such as email reminders, invoice submissions etc. Moreover, it will encourage you to hire better resources as the overall headcount will go down.

4. LACK OF MANPOWER:

The quantity of invoices that your company generates can be overwhelming. This can lead to missed follow-ups, forgotten invoice submissions, and an increasing unresolved dispute count. This is a major source of customer dissatisfaction and you might need to increase your headcount so as to optimise the work load. However, this additional cost can be avoided by simply transforming the AR Process with AR Automation.

5. YOUR CUSTOMERS KNOW THAT YOU ARE NOT A STRICT ENFORCER OF YOUR OWN CREDIT TERMS, AS LAID DOWN IN THE PO:

Customers tend to not take you seriously, if you don’t strictly follow the processes laid down and not send regular reminders about impending payment-due dates. It’s never a pragmatic policy to start following up on a customer just before the due date or right after the due date. Regular reminders ensure that your payments remain top-of-mind and also motivates customers to take action. Moreover, customers also feel that the seller is invested in them when reminders are sent out. Also, the customers know that you mean business when you impose penalties, such as credit freezes, and late payment fees. This will ensure a noticeable shift in your AR KPIs, however, you need to be sure if you want to incorporate such repercussions into your AR Process.

YOU ARE USING ARCHAIC, DISCONNECTED MANUAL PROCESSES:

Siloed manual processes, which, unfortunately, is a reality for many a businesses, lead to major gaps in the communication between the stakeholders, delays in response times, and it also puts extreme stress on the manpower to work on less productive workflows, such as manual invoice submissions, manual follow-ups etc. Too much of manual processes also leads to employee dissatisfaction which in turn leads to lower morale and compromised productivity, and of course, a higher attrition. The solution is simple – AR Automation along with integration of the AR software with your existing systems, such as ERP.

So, in simple words, the guru mantra to follow is AR Automation.

You can connect with us to see how an AR Automation Software, such as Inebura can help transform your entire AR Process by making it more productive and efficient. You can visit our website 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.

Author

Sudarshan Banerjee

Inebura , Head of Product

Sudarshan Banerjee is a Product, Process and Automation professional. His areas of interest include Sales Force Automation Tools, Sales Process Construction, Data Science, Data Analytics, Statutory Audit and Compliance, Project Management and Change Management.

He has over 19+ years of experience in Business Development, Sales, Process Planning, Business Strategy and Product Development spanning across various domains namely ITeS, FMCG,Financial Services, Travel& E-com.

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