For any business, Delivery is the holy grail. To get a product to a customer or a consumer, in the least possible time, using the safest possible way, at the least possible cost.
Obviously, it’s not just limited to manufacturing set up alone. It plays a critical role across industries. Be it retail, healthcare, financial services and even government and education. However complicated a problem this may sound, players in the Logistics value chain have made the solution, from the first to the last mile, possible. More than ever before, this has come to the fore during these trying times – where cost and time have attained a more critical dimension. No wonder it’s considered to be an essential service!
Whether it is the players who support the traditional brick-and-mortar model or the innovative e-commerce market, whether it’s working with the domestic customers in the hinterlands or the international markets, whether it’s supporting the usual supply chains or the more specialised cold chains, whether it’s the essential commodities or the ones that are precious or slow moving – the value that logistics industry provides is immense.
So where is the problem?
Well, when it comes to getting paid for providing that value – the challenges are common, universal and the ones that the logistics businesses are forced to live with! Broadly, this is where managing AR and collections comes in. Sounds familiar? Read on.
What are these challenges that cause delays in collections? Especially in Logistics sector.
Interestingly, many of these challenges are universal. However, by its very nature, Logistics adds its own twist to the conundrum! The nature of the beast you see!
- Collections as a process : Despite various teams and solutions working towards it, most of the collections process remains manual. Take reminders for example. A set of emails and phone calls – towards the end of the credit period. Another one can be managing those disputes – especially the ones that arise just before the payment is about to be released. Remember those? Efficient and effective? Mostly not.
- Information spread out across various systems. You might have a billing system for invoicing etc. Recall those big number of invoices you have to manage! And you also might have an ERP solution – customised or standardised – for managing the operations. Further, you also have various excel sheets that contain other vital information. Making sense of all this information together, to get the correct picture is critical. Where is the money stuck? Which customers are likely to pay? How much will we receive this month? More often than not, getting answers to important questions like these is a manual process. And of course not real time.
- Understanding the behaviour of segments. You might have multiple business segments of customers, spread across your business units. Air, Road, Seaways. Or direct supply and via Sub-Agents. B2B or B2C. All these parameters result in unique client behaviours when it comes to payments – and even disputes. A one-size-fits-all approach can only lead to further delays.
- Managing the ‘long tail’ : As it happens with most of the businesses, 80% of the revenues comes from 20% of your clients (key accounts, if you may!). But managing the rest of the 80% clients is real hard work and consumes a lot of your teams’ and the management’s time. Can that time not be spent better in ways that make collections effective? And release more of that stuck cash-flow?
- Access to ERP information. Even if you have deployed, a shiny new ERP to manage collections, the access is mainly to the finance team. When some critical information needs to be shared with other key stakeholders, it is done manually via various emails, excels and so on. Not exactly the definition of automation right? Chances of some if it falling through the cracks – high!
- Team collaboration. One team doesn’t run the entire logistics operations. Same is the case with seamless, timely receivables. Finance, Sales, Operations and maybe the client servicing teams need to be on the same page. Along with your customers, of course. Working together. Working pro-actively. As it happens, this collaboration is inefficient and reactive at best – causing delays and heart-burn for you and a bad experience for your customers.
Result? Not surprising. Sky high outstanding – that adversely impacts the working capital. Disputes – that cause both heartburn and delays. High efforts – in making sure that your clients pay for your own invoices. And finally – write-offs!
What can be done then? Accounts Receivable (AR) – hidden in plain sight!
These challenges are also an opportunity to better utilise the great source of working capital that’s right in front of you – your AR. It, of course is not a silver bullet. But businesses tend to assume that all is well when it comes to their AR/Collections process. It’s a really costly assumption to make though!
At the same time, it is important to not just react and take short term, tactical measures to improve collections. But it’s equally important to invest in long term improvements that will ensure larger strategic benefits. Spanning People, Process and of course, Technology!
Hey! We are already doing a bunch of things. Why anything new?
Let’s get a few of your key objections out of the way, first!
- Yes. Your AR does need a relook even though you have been working at it for a long time. All the above challenges are a testimony to that.
- Yes. You will need something to help improve those DSOs – despite the ERPs. By their very nature, ERPs are generic solutions and can do a broad range of things very well. But when it comes to things as specific as AR, you need a niche solution that is deep, not wide.
- Yes. Even if your payments are to be made by the customers – who you think you can’t control much – you can still improve your process. You will be surprised at how much of your challenges are caused by internal controllable things. Also, you should be able to ‘read’ some of your customer signals too.
- No. Collections is not just a ‘finance’ activity. It is an organisational problem. That helps pay all the salaries and helps your firm grow. So do call it out, even if you are not the right AR stakeholder.
- No. It won’t take a lot of change management. It’s a small non-invasive, surgical procedure. Not an open-heart surgery! But help, it surely will!
How will a niche AR Software or an AR Solution help Logistics business?
Well, this is where focussed AR platforms like numberz come in. numberz is a cloud based, insights driven, B2B Accounts Receivable and Collections Automation platform. With customers across industries, it helps enterprises reimagine the way they manage their receivables – the people, the process, the works! Helping businesses get paid faster, get paid better!
That’s why leading Logistics businesses like Blue Dart, Delhivery, East West Freight Carriers, Skyways Logistics, BVC Logistics have partnered with us.
- Adopt a single-platform that helps plan, schedule and track all AR and Collections activities without overly depending on excel sheets.
- Integrate and make visible all customer AR details to everyone involved and streamline processes – (like reminders to be sent at different intervals etc.) taking a big load off your business team.
- Automate management and resolution of invoice disputes, drastically bringing down resolution time and the time your staff and customers spend on frustrating back-and-forth exchanges.
- Track and measure the performance of your collection efforts and that of your Collections team.
And much much more.
A new AR solution in these times? How is that even feasible?
Well, it’s been a while since the downturn started impacting the business. In fact, more than ever before, NOW might is exactly the right time to give a boost to your accounts receivable and collections process and unlock that much-needed liquidity. And you will not only be solving for now, but also for your business when you grow after this slump is over. Here is an article where we have spoken about this more.
Remember, the reactive approach can help you survive. But a pro-active one will ensure that you thrive. Even in uncertain times.