What benefits do companies who utilize account receivables management software often recognize? To put it most simply, using account receivable management is like hiring the perfect employee who always follows your direction, never lets anything fall through the cracks, and works 24/7. While this is attractive enough by itself, let’s get into the tangible importance of implementing account receivable management:
Improve Your Cash Position
You have bills you have to pay. If you don’t get paid on time, you will inevitably run into dry spells when you owe more than what you are taking in. By focusing on your account receivable, utilizing best practices, reminding customers to pay, identifying invoices earlier in the process, and making it easier for the customers to pay – you will have a very clear picture of your cash position. Some account receivable management includes a statistical cash forecast based on your customer’s historical payment history so that you know what cash you should receive in the next week out to the next month.
Increase Control Over Cash And Working Capital
Understanding your cash position and improving accounts receivable performance is a major key to managing and improving working capital. By managing working capital effectively, you have the insights which you need to make strategic investment decisions such as new employee hires, capital equipment purchases, facility expansion, and some other investments to grow your business; further, you will have more cash on hand by improving your invoice collection process.
Increase Accounts Receivable Management Efficiency
How much time do you waste trying to figure out who to call, why and when, and how long does it take you to get the correct information which you need to resolve issues so that you can get paid? The answer is a lot more time than you usually think. According to the report, companies that use accounts receivable management to get organized and to automate mundane tasks can:
- Reduce time spent prioritizing and preparing for calls from 15% to 6%.
- Increase the time they spend soliciting customers for payment from 20% to 62%.
- Reduce time spent in managing disputes from 40% to 13%.
Improve Customer Communication
Account Receivables management should make it easier for you to communicate with customers. From one screen, you can typically review account information, attach invoices, create emails, create email merge documents, and log phone calls. And best of all, each and every communication is stored for future reviews and analysis. Save time, and make sure to better serve your customers through improved communication tools that are embedded in more advanced accounts receivables management systems.
Improve Customer Service And Satisfaction
Most customers want to pay you on time, and it is often your fault they pay late. Either you did not send the invoice early enough for them to make an on-time payment, or there was a problem with the invoice, and they would not pay until it is fixed. What is the impact of these preventable issues on the customer satisfaction part? They are significant. Consider that about 50% of all invoice issues are related to missing or even incorrect purchase order information on your invoices – a problem that is very much preventable. Moreover, consider how frustrated your customers will be if you continually call them for the late payment when it is your fault they did not get the invoice soon enough, or when it is your fault that you continually exclude their PO from their invoice.
Account receivable management can automate invoice delivery to customers, alert you to problems with invoices such as missing purchase orders, and provides everything which you require in one centralized location so that you can serve your customers in a better, wasting less of their time, and improving your relationship so that they will buy more products and services down the road.
Reduce Administrative Costs
It is a digital age. And are you still mailing statements and invoices or sending them via fax? Account Receivables management business applications are designed to automate every activity that you should not require human intervention. Why pay someone to print, fold, and stuff envelopes when you can probably automate those communications for most, if not all, all of your customers. Moreover, what will you save in envelopes, paper, toner, postage, and lost time in this antiquated process?
Shorten The Sales To Payment Cycle
When any manufacturer or distributor makes a sale, they incur hard costs for the inventory and labor required to fulfil the order. When a service organization secures approval for a new project which they allocate expensive resources to provide the service. The key to a successful business is the ability to get paid as soon as possible on the products or service which they provide. You rely on your account system to create the sales order and the invoice, but then your accounts receivable management takes over. Invoices can be automatically sent to customers the day when they are created, and a built-in customer portal and online bill pay capabilities allow your customers to pay you with the help of a credit card or ACH, giving customers more options to pay you sooner.
Minimize Credit Risk
How much credit should you give to customers? What is your risk that they would not pay? Every company that usually extends credit is taking a calculated risk of getting paid on perishable time or inventory. But that is the nature of businesses today – customers expect credit terms, and competitors extend credit so that everyone has to do the same. But there are different ways to reduce your risks. You can even rely on information from the third-party credit bureaus, which is helpful for the new customers, and you can monitor your existing customer relationships for the customers that are slowly becoming higher-risk accounts. Many account receivables management applications allow you to store credit reports from bureaus, send out credit applications and file them against account records, create your own credit scoring formulas, color code customers by risk level, and set up alerts to notify you of customers with excessive broken promises, accounts or disputes that take longer to pay their bills. Not that there are many account receivables management solutions that are having its specialization in business credit management that offer little in respect to collections automaton while other applications are stronger in collections with very little credit functionality.
