Running a business is never easy. However, you don’t have to make it harder than it has to be. For example, if sales & marketing teams still work on first-generation software for chasing payments & the fact that your customers pay on time, then you’re stopping your business from scaling up.
One of the drawbacks of using static and rudimentary software programs for Accounts Receivables (AR) management is that they are inefficient in keeping the late payments on track and are only good for the maintenance of the records.
It’s not uncommon for distributors, retailers, and the SMEs to observe a delay in invoices to be paid of as much as 2 weeks in their collections. However, more often than not, these late payments are on the account of poor handling of the AR processes.
The following are the main reasons why this problem exists:
The “Manual” Nature of Management
A large number of small businesses have become tech-savvy and “smart” as they use social media for marketing, digital communication tools like WhatsApp, etc. However, they haven’t done much to get paid faster, get delayed invoice payments and that invoices get paid on time.
Since with most businesses, the AR processes are still very “manual” and time-intensive, it alone causes a delay of 4-5 days in collection processes. Bear in mind that even using software like Tally or MS Excel can only help so much when it comes to invoicing and collections. This is because even these are not fully automated, i.e. you need someone to feed the data into them to enhance collection processes.
Issues with the Payment Process
Even after you have created the invoices and sent the same to their respective payees, there are usually more problems lying ahead that lead to delayed invoice payments.
The payment process is usually not that simple. For instance, if during the delivery of particular type of 100 items, 10 are damaged, then the customer will deduct the amount of these from the total bill amount. Similarly, if a customer has paid more than they were required to, then the excess amount has to be taken into account as well.
There are many other simple yet disruptive problems that lead to delayed invoice payments. For instance, a customer may lose their copy of an invoice, or find a discrepancy in the same and hold the payment. Sometimes they even forget to tell you about it, and you come to know realize it only when you remind them about the payment. However, a lot of time has already been wasted, and more will be there as you will update the invoice and resend it.
The Silent Problem That’s Hurting Your Business
Late payments are affecting your business and you don’t even know it.
Wastage of Human Resources
Let’s take a look at some facts right off the bat. Every day, an average SMEs’:
- Finance team spends a minimum of 2.5 hours processing invoice-related inquiries and in reconciliation
- Sales team spends about 25-30% of their time following up with their customers, sending reminders, and doing all sorts of things to collect the payments as soon as possible
It’s not hard to see why the existing systems that are prevalent in the majority of SMEs and distributors are inefficient and keeping your staff from doing productive work, i.e. the work that actually contributes to the business growth.
The Benefits of Ditching the Manual AR System
Every business is largely centered around two things- receivables and payables. These two elements govern the entire cashflow and are used by you to make financial decisions for your company.
When payments are delayed, it can lead to all kinds of problems. For instance, if you slip into a cash crunch, then the salaries of your employees may get delayed and affect their morale.
Lack of funds could also affect your business growth and the fact that you get paid on time. For instance, you may not be able to process a large order just because you don’t have the funds to procure the material for the same.
With a comprehensive and automated AR management system, you can benefit in many ways:
Benefits for the Finance Team
Equipped with a variety of powerful tools, the finance team can greatly bring down the DSOs. With a dedicated dispute management system, they can resolve the customer queries/complaints faster than ever and keep the payments pipeline clear.
Working with GST becomes super easy and super simple with a software that has a support for it. Thus, the finance team can close the books faster to work on reconciliation and file the returns on time. This means that you can get your tax refund on time as well.
Benefits for the Sales Team
It’s a shame that in the manual system, the sales team spends as much as a third of their company time in collecting the payments from the customers. However, an automated AR system can solve this problem as it requires minimum intervention on the sales team’s part. Thus, they can spend the majority of their time they are hired for, which is bringing in more customers and more orders.
An AR management system also provides support for financing. This means that customers can’t say no to the payments because of lack of funds- they can be provided small loans by the sales team seamlessly and almost immediately.
If you are worried that you will have to let go of your current IT software to embrace the AR system, then you will be glad to know that it can be easily integrated with your current software including Tally. Also, since it’s basically based on the Software as a Service (SaaS) model, you won’t have to deal with a whole lot of system management, as the back-end processes like software updating, server maintenance, etc. are done on the provider’s end.
Lastly, a CRM software for accounts receivable can provide you cheaper and faster online payments methods, and there is no way your customers won’t appreciate that can pay you with lower online transaction fees.
Delayed payments are harmful to your business in many ways. So, don’t settle, and switch to a system you deserve- a system that can make a huge difference to your business in just a short period.