Magazine article Business Credit

Getting Paid Made Easier: Automating Accounts Receivables Processes Can Help Shorten DSO, Improve Customer Service

Magazine article Business Credit

Getting Paid Made Easier: Automating Accounts Receivables Processes Can Help Shorten DSO, Improve Customer Service

Article excerpt

Without a doubt, every department in a company adds something to the success of a business. Regardless of how well those other departments perform, cash flow stands as a business's lifeblood. Money needs to come in the door to keep a company viable.

"Treasury departments today most certainly have a need for better forecasts and improved cash collections," said Phyllis Saavedra, director of analytics for Emagia Corporation. Look at your accounts receivable processes, she suggests. How long does it take for you to collect on an invoice once it's mailed? Is there more you can do to make that happen faster or more efficiently? Any type of system over time requires regular maintenance, updating or even replacement. "As a company, you're typically doing something that impedes the opportunity to maximize your cash flow and your customer payment behavior." Making the process easier means faster and better service, Emagia CEO Veena Gundavelli said. "Automation makes the credit department agile and active."

To date, very little automation occurs in credit or collection departments, Saavedra said. However, the reasons more accounts receivables (A/R) departments haven't transitioned from paper to paperless vary. "A/R is sort of the forgotten department," she said. Historically, "it's been difficult for finance departments to spend money on the receiving side of the business, but it's one of the places where companies can get the most bang for their buck." Many companies focused on selling, don't focus enough on collecting cash, said James Mallory, of e2b teknologies, publishers of Anytime Collect receivables automation software.

Some organizations just don't understand the benefits and capabilities such systems have, noted Jay Tchakarov, associate vice president of marketing for HighRadius Corporation. For example, "many people didn't know the cloud is more secure than on-premise solutions," he said. Mark Wilson, president of TermSync, Inc., believes it has more to do with companies settling for the status quo, however. "Their current system isn't completely broken. It's inefficient, but it sort of works."

Consider the next step your credit department can take to make it more productive, Tchakarov suggested. Some of the biggest challenges in producing or sending invoices are tied to manual processes. Respondents to a survey Tchakarov cited identified the following three areas as their top issues: too manual of a process, pricing errors and inaccurate customer information. For many of the benefits discussed below, the vendors interviewed suggest automating the A/R process with management software. "It allows you to focus on higher value activities," Tchakarov said.

Multiple Benefits

Benefits reaped from automated systems are plentiful, the vendors said. Many times, customers claim they never received an invoice--something one typically doesn't find out until it comes due. "Tracking is limited without electronic delivery," Wilson said. With paper invoices, "you have no idea when or if they were received," he noted. The delivery of electronic invoices is immediate. Automated systems make it possible to track when an invoice is sent and when it was opened, Wilson said. "There is no more calling a customer after 30-60 days to find out they never received the invoice. With electronic systems, you know much earlier whether your customer actually received the invoice. You can follow up well before it's due. That speeds up the process dramatically."

If a company provides quality products and service, "most customers want to pay you on time," Mallory said. It's also easier to confirm an email address than a physical address given that so many companies have multiple addresses. And if it's necessary to resend an invoice, an email is easier, cheaper and quicker. Some industries are still in the technology dark ages, he added. If yours is one of them, Mallory suggests getting an intern to call customers for email addresses. …

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