Smart Accounts Receivable & Collections Process: Time for a Change!

 |  Feb 23, 2021

Smart Accounts Receivable & Collections Process: Time for a Change!

Change your collections process now and grow your business faster!

In our personal lives, we are adopting ‘newness’ as if there is no tomorrow. The apps we download, the newest of podcasts we listen to, from the conscious foods to even the yet-to-be-ubiquitous EVs! Notice how much we have gotten used to voice commands – and not just on your Alexa or Google Nest devices! We are newer ways to improve things in life (from Ikigai to the Mindfulness apps to the WhatsApp alternatives). We are seeing not just tech come to for help, but its increased adoption too: it’s clearly not a one-way street with high supply and no demand.

Come to think of your work – and especially the Collections or Receivable now.

Why is it still where it was many many years ago?

“Same old, same old” some AR Managers and CFOs may feel. Other, ‘more open’, might call it “an old wine in a new bottle” – again indicating that only a little has changed. The same old delays in getting paid. The same old “the client made some excuses” excuse. The same old disputes that arise at the last moment. The same old “your invoice was not ok, can you please resend”. The same old follow-ups. The same old rabbit hole of month-end pressure to get the money in the bank. Same old heartburn. Same old, same old! Ever wonder why?

AR Problem

The uncomfortable truth: We might be modern businesses, but some of the processes were created in the Stone Age! The origins of some of the accounting practices that include invoicing, collections etc, trace their origins to the beginning of the Industrial Revolution! And though we now use shiny new ‘computing machines’ and software called Accounting Solutions/ERPs, some of our practices are yet to catch up with today’s realities.

FUD: Though many businesses have overcome the fear, uncertainty, doubt party, when they started using ERPs and newer Accounting solutions, when it comes to improvements in critical yet niche areas like AR – they are full of objections! Of course, they do want to improve the DSOs and increase the team efficiency and reduce the manual load, etc etc. But then come the objections:

How can an automated AR platform ever work? It’s my clients who cause the delays.

Will it not cause redundancies and I will have to fire people or maybe leave myself?

What if this change introduces some errors? Do I even know what inside of their system? Is it even worth it?

Tinkering with what we have now will lead to too many changes. Change might be too expensive.

Skewed Perspectives: If only businesses put a cost to the status quo, they would surely start pushing the envelope. Things like :

  • Delayed payments can shave off up to 3% of your revenues! According to the Working Capital report of 2019, Euler Hermes.
  • Timely payments = Growth. Did we make this connection? What’s the cost of not growing? A tough one, but then that’s the impact!
  • If collections are all about follow-ups, are we jeopardizing the client relationships, that we so painstakingly built?
  • Most importantly, it’s not just about increasing the productivity of team members. It’s about taking those important decisions that cost money. The money that’s tied-up in receivables.

Guess what? All of these can be easily addressed.

Here is how you can go about thinking through the business case for re-imagining the receivables process – for your management and the teams alike – using a niche AR platform like numberz

Recognize the visible and hidden benefits. It’s about acknowledging the problem. And address the objections.

A smart AR solution will only complement your existing People, Process, and Technology investments. Not complicate or replace those. New age AR solutions fit in with your existing workflows while ensuring that the collections and other operational teams are able to leverage the best practices too. The decision-making is augmented substantially since you have all your AR information in visual and easy-to-digest formats – combining all the data sources. Not just the data from the ERP but also the behavioral information. So that instead of taking a one-size-fits-all approach, you are able to tailor the workflows according to the client’s needs and eccentricities. Having an AR solution also does not mean replacing people – but empowering them, making them more effective. In essence, you get to have better control and visibility around all things AR.

Smart AR automation is not just about productivity but is about getting faster cashflows with lesser efforts – while providing a great client experience. ROI from AR solutions needs to be looked at from a broader perspective. Monetizable returnsIncreased positive cashflows (ie reduction in the working capital costs stuck in delayed payments), Increased sales/revenues/growth (by better deploying the freed-up cash), Lower cost of disputes (remember it takes extra time and efforts to resolve a dispute), Increased coverage by the team members (can handle more clients), Increased productivity (do more in lesser time), Reduced time in reaching out to the long tail customers (low value, high volume), etc etc. But there are many many Non-Monetizable (or indirect) returns too: Better visibility and control of the entire AR process (better decision making – priceless), Providing better client experience (retention and happy clients – priceless), Lesser heart burns for the teams (managing wieldy customers and followups – priceless), Lower risk of defaults (with orchestrated workflows – priceless) and many more.

Smart AR Automation can help you augment your client relationship and hence ensure growth.

Create a robust, forward-looking, AR improvement plan grounded in a sound tech evaluation

If you want to do all the above (I mean only the positive things), it might be time for you to evaluate an AR platform. Create some good options for yourself. While you might have a choice of many, you surely can do well for yourself if you can bear these in mind :

  1. Evaluate solutions that have both a pedigree and some vintage – ie the credibility you need to make sure that the deployment is successful.
  2. Cheaper is not better. AR is an accounting term. And with your experience, you already know that even your ERP/Accounting solution has an AR module. So if someone says, we also help with AR, it doesn’t mean much. You need to go a little deep to see what fits your needs.
  3. Client case studies are gold. They will help you understand the fitment, scale and also a real-world credibility check!

Investing in a niche AR solution is not only commonsensical; it’s something that you should have done yesterday!

If you want to recoup what you lost when Covid hit your business or improve the challenges that you have been (unwittingly so!) facing (whether you admit it or not), you should give an AR solution a spin. Especially true when some of the challenges above are your daily reality.

There might be many solutions. Do a robust evaluation. See the depth of the solution provided. Ask for a limited period pilot to de-risk yourself. Or even use an online ROI scenario generator (like the one on numberz website) to create plans A and B for yourself.

The strongest business case for adopting an AR solution is the Growth that is led by a strong AR/Collections process and creating a happy, efficient and effective Team.

Don’t let the status quo fool you and the fear of the change fool you into complacency. The upsides are way too many to ignore!

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Getting paid was endless and many a times embarrassing series of follow-ups. With numberz it begins with a click and ends with a click! Sraboni Harlalka Partner at Wodehouse Capital

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