Is your AR Aging creeping beyond resolution? Are you even able to review and report on your aging accounts receivable? The role of accounts receivables (AR) teams is increasingly important as the backbone of your organization’s financial health. However, the last two years have proven that the standard manual AR processes are not sustainable for the long-term success of the organization. Still, there are some fundamental and easily-deployed tactics that are sometimes forgotten in the rigmarole of daily activities – tactics and concepts that every credit department can use to reduce outstanding receivables.
Provide accurate and timely information
Accurate and timely information is important for internal credit and collection professionals but also for customers. AR teams need information to help prioritize activities, to provide information to customers, and to back-up critical decisions and conversations. For example, a credit manager should be able to easily see payment history for a customer when deciding whether to increase credit limits. A collections team should be able to quickly see late invoices and recent payments to determine the status of each account in their collections queue.
At the same time, customers need timely and accurate invoice and statement information as well. Some studies indicate that most customers do not intend to pay late. However, when they receive, late or inaccurate invoices, length disputes or extended payment times result. AR departments can address these issues by improving sales order and invoice accuracy, as well as automating invoice delivery to get invoices to customers faster. An integrated document management solution will provide credit and collection managers access to original documents that can be reviewed and sent to customers upon request.
There are other methods to providing information to customers and credit professionals. These can range from direct access to the back-office accounting system to the creation and distribution of reports. These methods are not recommended as they are prone to security issues and most often include additional manual activities, when time is already a commodity for AR teams.
Much like sales notes in a CRM system, credit and collection activities should be well documented in a centralized location or database. You need to ensure that phone conversations, emails, disputes, account notes, and other important data is documented and available to authorized employees.
Many companies will keep this information stored in local or centralized spreadsheets, while some are able to leverage memos or note features in their existing accounting system for very basic record keeping. Still others may document activities using other databases or applications.
It is important to consider several things when selecting any system to track credit and collections activities. These include:
- Can remote users access notes and account information?
- Can all notes, documents, and financial information be accessed from a central location or will employees have to use multiple systems?
- Does the system provide access to account level information such as contacts, invoices, payments, and other details that support credit and collection activities?
- Does the system provide adequate security to protect customer lists or company financial information?
- Is it easy to schedule activities and to assign activities to other employees?
Being able to document these and many other activities will set you on your way to reduce outstanding accounts receivable.
Leverage AR Automation
Many of the time-consuming processes, AR teams face today can be automated or simplified to the point where they are much easier to manage. This includes invoice and statement delivery, due date reminders, and past due collections communications.
The first step towards automation begins with invoices and statements. One of the most common reasons for non-payment is there was never an invoice received. The AR team has to reprint and send the invoice over email, fax or post. This challenge could be avoided altogether if the customer had virtual access to invoices and statements.
Slowing down the process further is that some companies don’t allow collections teams the access needed to print or reprint invoices. This delays the process even further.
Much of the communication that is provided to late accounts is standard and could be automated based on a customer classification, amount owed, and days outstanding. Collection representatives shouldn’t have to write the same email or letter over and over again to dozens or hundreds of customers when they could quickly mass-mail customers who should receive the same message.
Enter Award-Winning Lockstep
Lockstep’s award-winning accounts receivables (AR) automation solution, Lockstep® Receivables, helps clients increase cash flow, decrease DSO, and scale their accounting departments through digital transformation.