Inefficient Accounts Receivable given the cost of capital, increases payment-processing fees, increases Days Sales Outstanding (DSO) and the potential of bad debt. Bad debt is the final straw of a painful customer transaction meaning; your company will never collect that revenue. This factor alone requires your attention to Accounts Receivable management, yet accounts receivables often are not prioritized as a revenue driver because the sale has been booked. In reality to complete the sale cycle, a company must collect the money.
At a Macro level - leaving revenue on the table is painful, but not nearly as painful as funding a customer’s purchase with no return thus trapping receivables on the balance sheet. Lowering the days to collect the cash thereby improving working capital is a catalyst to improved operations.
A solution to increase liquidity and expand flexibility to invest in growth or product development, decrease bad debt and maximize shareholder returns is found by using an Account Receivable Automation cloud-based platform.
Research shows poor A/R management negatively impacts margins. Today’s Accounts Receivable departments (A/R) are highly inefficient, often times adopting multiple platforms to process checks, automated clearing house (ACH), Credit Cards, Debit Cards, and cash with multiple channels to support mailed in, called-in, in-person, online and mobile payments. Below I have laid out three realities A/R may be experiencing and how they negatively impact your bottom line.
1) Lack of Policy Enforcement in Accounts Receivable
If A/R policies are not enforced, they are easily overlooked. Complacency, lack of urgency and lack focus in A/R management may be driven by more attention to sales, development and growth within the company. There is nothing wrong with a sales driven focus but don’t forget about A/R management can be used to drive more CASH collection reducing debt liability.
2) Unintentionally offering financing with ZERO return
Prioritizing sales without proper A/R management can hurt the working capital. Simply put not getting paid hurts cash coming into the business. Money is the lifeblood of any business and paying attention to A/R management will allow for a leaner operation and a more robust bottom line. Getting paid today and paying vendors tomorrow are keys to driving growth. The last thing a business wants to do is offer financing and not knowingly earn zero return. A/R teams and sales team must be unified in communicating the financing terms offered.
3) Putting your cash flow on a tightrope
Customers pay late, invoices are not always correct, policy is inconsistent on payment terms and the A/R system has multiple facets and supports multiple different platforms. These issues can cause problems and slow the collection process of payments, which leads to borrowing, creating a disadvantage and putting cash flow on a tightrope.
Seek a platform that fully integrates into your system, easily lowers your DSO, increases accuracy, instantly clears invoices and allows cash to clear. An A/R platform not only improves overall efficiency, it becomes the change that frees up the flow of capital to invest in growth, increase shareholder payouts and develop products.
Learn more about improving your efficiencies, clearing invoices quickly, thereby reducing DSO and freeing up cash-flow here and by watching or reading additional VLOGs and Blogs
Listed by CFO Tech as one of the Top 10 Accounts Payable Solution Providers 2018 and 2019 and by CIO Review as part of the 20 Most Promising Corporate Finance Tech companies for 2017, OnPay Solutions streamlines processes for accounts payable by automating invoice processing and payments.