Disputes in Account Receivables: Challenges and Solutions with Receivable Analytics

 |  Apr 17, 2018

Disputes in Account Receivables: Challenges and Solutions with Receivable Analytics

Running a successful business is all about continued efforts towards boosted profits and limited bad debt. However, when assessing the major costs such as human resources, marketing, branding, R&D, etc. especially without a good receivable analytics or predictive analytics program, it’s easy to forget the hidden, or “less-obvious” factors that could be hurting your cash flow more than you think. One of these is dispute management.

The Bitter Truth about Payment Disputes

When was the last time you sat down to analyze how much damage the accounts related disputes are causing to the cash flow of your business? Well, if you do it today, you will be surprised to know the size of it.

A small error originating from one department, let it be accounts or collections, can result in a major dispute that emerges only later. Sometimes, the mistake is on the client’s side. Either way, when the anomaly does come to light, numerous exchanges take place between the collections department and the client, and this can go on for weeks!

What’s more concerning is that in 5% of such cases a proper conflict resolution is never achieved and the disputed amount is written off as bad debt. This is a direct financial loss to the company.

The Challenges

The following are some of the main challenges common to every corporate’s dispute management system:

  • In many cases, when there are multiple disputes on a single invoice, a client resorts to revoking the full payment. This is because it’s not their money at stake, and they don’t have the time to do the leg-work, i.e., fetch the records and cross-check the orders to find out what went wrong. Putting a hold on the payment seems an easy solution.
  • In order to achieve a successful dispute resolution, members of various departments have to work together to verify details and track the steps to the origin of the dispute. This is a labor-intensive and time-intensive process that causes wastage of human resources, cash flow, and valuable company time.
  • Recurring disputes become common when the dispute management process is manual in nature.

The Solution: Receivable Analytics

Process automation which is backed by receivable analytics and predictive analytics is the key to an efficient dispute resolution solution. The reason is simple- when information flows seamlessly between you and your clients, there is no room left for confusion.

With the old records available to both parties on a professional and well-organized platform, it’s easier to share data and verify the claims. So:  

  • A comprehensive and robust receivable analytics management system can minimize losses due to unresolved disputes, and thus, improve the cash flow.
  • With automation, you can save a lot of corporate time and resources.
  • Data analytics in dispute management can quickly identify the problems that lead to recurring disputes and high bad debt.

In addition to that, the following are some other steps you can take to make improve dispute management:

  • Review terms and policies before committing to a business relationship with a new client.
  • Double check the pricing, quantities, terms of sale, etc. in purchase orders for errors and discrepancies to sort out the issues, if there are any, before processing the same. This way, the risk of a future dispute is already reduced.
  • Follow-up with a client before an account is due. This gives you time to address the accounts receivables problems in advance.

Disputes in account receivables aren’t just an unwanted inconvenience, they are damaging to operational costs and company time. Thus, they must be tackled in an efficient manner to protect the cash flow and improve company’s productivity.

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