Boost Cash Conversion With Accounts Receivable

Accounts Receivable AR Automation automation B2B Payments cashflow

Proactive accounts receivable management shortens the cash conversion cycle. Four steps do most of the work: understand why each customer pays late, tighten the AR process from record keeping to payment terms and invoice delivery, unify receivables data with your accounting software so cash decisions rest on current figures, and make billing and payment an experience customers want to repeat.

Effective Accounts Receivables (AR) management for maximising cash flow is one of the most critical aspects of modern-day business operations.

When businesses proactively manage their accounts receivables, they shorten their cash conversion cycles. Businesses can meet regular expenses and ensure continuous and consistent growth by ensuring timely payments. Successful cash flow management allows businesses to expand, recruit fresh talent, and invest in research and development.

If your business struggles to manage accounts receivables and maintain a healthy cash flow, here are four steps you should practice for cash conversion acceleration.

Four steps to boost cash flow with AR

1. Understand your customers

Miscommunications and disputes can delay payments, decelerating the cash conversion cycle and jeopardising your customer relationships.

Recent advancements in Finance Technology have paved the way for Accounts Receivable (AR) teams to move towards a more advisory role. By using AR automation, for instance, AR teams can rely on workflows to automatically send invoices and reminders, saving time to focus on customers needing more personalised communications. Credit risk data is also integrated into more comprehensive AR platforms, providing businesses with crucial information to effectively communicate with customers based on their payment behaviour.

It’s important to remember that the failure to make timely payments doesn’t always reflect problems with your customers. Your accounts receivable processes may also be to blame, and close customer engagement can help you understand and resolve issues preventing them from paying you on time.

2. Streamline your AR processes

After you’ve worked to understand your customers, it’s time to tighten up your AR processes. Here are the tips to put into practice:

Keep accurate records: Every customer’s data record should include sales orders, contracts, the time needed to fulfil orders, resources that went into fulfilling orders, delivery confirmation documents, all paid and unpaid invoices, the due date for each invoice, and all payment-related communications. The more customers you have, the harder it will be to manage customer data. That’s why the records should be up to date and organised.
Set clear payment terms: By setting payment terms clearly, you can avoid issues like late payments and payment disputes. The payment terms should include the amount for delivered goods and/or services, the date when they’ll receive the invoice, the date of payment, and the payment methods. The terms should include late payment consequences, credit policies to discourage late payments, and early payment rewards.
Deliver invoices on-time: With AR automation, you can set and forget invoice delivery via digital methods such as email and SMS or added automatically to an online payment platform. Sending invoices electronically ensures customers receive invoices on communication platforms they use daily and are easily accessible.
Offer flexible payments: Flexibility in payment methods can make things easy for you and your customers. Also, your customers can have fewer excuses for payment delays when you provide them a convenient way to pay you with a wide range of payment methods. Providing digital ‘Pay Now’ buttons on your invoices, for instance, is a great way to give customers the quick payment experience they now expect.

steps to boost cash flow with AR infographic

3. Manage cash efficiently with unified data

AR automation platforms provide the advantage of data unification, i.e. all customer account and receivables status data and information are in one place. By consolidating data with your accounting software, your AR automation provides deep insights to optimise your business’s working capital. This will ensure that your cash flow management decisions are based on accurate data.

Most modern-day AR automation platforms provide advanced analytics capabilities. An AR automation platform can aggregate the most critical metrics in a single dashboard, such as Days Sales Outstanding (DSO). Before AR automation emerged, people had to pull data from multiple reports across different sources. Through AR automation, you can analyse data in real-time. Data measurement also becomes more straightforward, making it easy to provide reports to executive leadership.

4. Create great experiences for your customers

Accounts receivable automation is great. There’s no doubt about it. However, alongside the automation of your AR processes, you also have to focus on how those processes can enhance your customers’ experiences. It’s important to remember that across most industries nowadays, barriers that previously existed when businesses switched suppliers are fading fast, and even a single negative experience can make your customers contemplate switching providers. That’s why you must pay attention to each customer experience aspect, from the billing processes to those associated with B2B payments.

When you give your customers an enhanced experience during billing and payment, you motivate them to pay you on time. You should pay attention to the currently supported payment and invoice delivery methods. The invoice delivery channels should be based on what’s convenient for your customers, and the same goes for the payment methods.

You should invest everything you can towards shifting the mindset of your business from supplier-centric to customer-centric. In the long run, this will go a long way towards reducing payment times and hastening cash conversion cycles.

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Boost cash flow with AR automation

The simplest way to put these steps into practice is to invest in a platform that can automate your AR processes. Besides boosting cash flow, an AR automation platform can also enhance the overall productivity of your business and its workforce.

Book a free demo of ezyCollect and discover how AR automation and B2B digital payments can work for you.

Written by

Kristina Estoesta

Has written more about getting paid on time than most people have thought about it. If you have read something here about accounts receivable, odds are it was hers.