3 ways to speed up your accounts receivable collection process

3 ways to speed up your accounts receivable collection process

Automation has transformed traditional accounts receivable processes. In a 2021 research, about 87% of firms with automated AR functions said they are processing faster, while 79% say they have improved their team efficiency. 

The benefits are clear: With automation, organisations can streamline and gain vital visibility into the order-to-cash processes, creating benefits that lead to speeding up AR collections and improving cash flow.

In our recently concluded webinar, we shared how ezyCollect is changing the way businesses experience the order-to-cash process. By leveraging data and payment innovations, ezyCollect’s AR automation eliminates manual steps in the process, helping you get payments faster. 

But first, let’s understand O2C in terms of AR.

How the Order-to-Cash process impacts AR Collections

AR professionals know that the order-to-cash process is complicated – getting paid on time is not a simple problem to solve. If we look at the diagram below, you’ll see a lot of costs and money tied up in the order-to-cash cycle. 

infographic showing steps in O2C process
One of the critical elements in this cycle is the Days Sales Outstanding (DSO). Take, for example, a business turning over 10 million a year. If they can reduce their day sales outstanding by five days, they’re unlocking about $50,000 to 60,000 of extra working capital every month.

Days Sales Outstanding (DSO) and how to halve it

Recent developments in technology have improved automation. Beyond sending collection emails and reminders, automation now taps into data and digital payments to further eliminate manual steps in the O2C process.

infographic showing 3 ways to speed up AR collections

3 critical areas of focus in AR process to accelerate payments

The key to eliminating late payments is providing win-win solutions to your customers. The point here is that you and your customers should be on the same side, wherein on-time payments create the same mutual value. To do this, we recommend focusing on these three areas in the O2C process to use the power of data and automation in accelerating collections and improving the payment experience.

1. Best practice credit approval

Extending credit is standard practice in B2B transactions and can help stimulate sales. But it also means exposing your business to risks of late payments or bad debts.

Credit assessment of customers during onboarding is an effective way to curb these risks. However, it would be best if you also do it efficiently to ensure that your customers have a good onboarding experience.

How an enhanced credit application process can protect your business from bad debts

For many businesses, the traditional way of onboarding new customers involves using PDF forms that must be filled out and submitted through email and fax together with other documents that must be attached, such as trade references, business documents, etc. This process, as we know, is inefficient and doesn’t incorporate dynamic credit data into the picture.

Online credit applications solve these challenges in the onboarding process. And it does this by:

  1. Providing your customers with a digital application form

 The accessibility of this online application form means you can link to it from your website or have your sales representative provide it to their customers. As it’s customisable, you can add your terms and conditions, privacy policy, and relevant details. This customisation adds to your customers’ professional impression, encouraging them to be on that same level of professionalism.

The ease of use of an online application is also a no-brainer in giving them a better onboarding experience.

2. Leveraging data for credit assessment of your prospective customers

Digital forms also allow you to capture all the data you need and easily use them to make informed business credit decisions and provide the best possible terms for your customers.

More than just gathering trade references, an online credit application collects digital data that can be easily assessed by third-party credit bureaus, giving you data-backed insights based on business credit scores.

What is a business credit score and other FAQs

Optimising your credit approval process ensures you get the right customers and give them the right amount of credit. This way, you can anticipate and mitigate risks before making that sale.

2. Introduce automation earlier in the process

On the outside, it might seem that the AR process is simple: send out invoices, collect payments and reconcile. But those who worked in AR know that behind every collection, you’ll find a complex set of manual tasks.

Introducing automation earlier in the O2C process allows you to reduce the manual steps down the line. Take, for example, obtaining payment authority. Direct Debit Authority is not something new, but the latest innovation from ezyCollect increases the odds the customers will give you authority for the payments to be automatically taken from that purchase – even as early as the sales order.

Direct Debit on Sales Orders

Once you apply Direct Debit in your process, a whole mechanism works behind the scenes to send out a payment notification, write back the payment to your accounting software and associate it with an invoice. Bypassing otherwise manual steps allows you to fulfil that order earlier and, at the same time, get your payment right away. This creates a “win-win” situation for both you and your customers.

Direct Debit on Outsatanding invoices

Direct Debit can be applied to your outstanding invoices and is as simple as clicking a button. You can even schedule when to execute the direct debit transaction in cases when your client needs more flexibility on the payment date.

This capability gives you and your customers more control over the direct debit transaction. It also improves the overall client relationship by encouraging customers to communicate with you openly – taking out the guesswork of delayed payments.

3. Auto-Collect and Auto-Reconcile

Chasing payments and reconciling them are other tasks that can benefit from automation. And again, Direct Debit Authority is vital in virtually eliminating these steps.

With an Auto Collect feature, payment happens automatically once the invoice becomes due (provided that there’s DDA), and it also automatically reconciles the payment for you.

The level of automation, however, doesn’t take away the control from you and your customers. You can always deactivate the feature when there are disputes, or the customer might need more time to make the payment. Daily reports ensure that you can keep track of due invoices so you can act on interventions if necessary. 

The innovations behind ezyCollect Direct Debit payments lie in getting you that commitment from your client – not just in words, but in actual payment – and doing it in ways that eliminate steps from your usual process.

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The future of AR Collections with ezyCollect

In the future, we are looking to expand on our platform to remove as much manual work as possible. We are continually working to not only get you to 0 days late but also to dramatically reduce the cost you’re spending in AR collections in terms of time, effort and stress.

If you have questions on how ezyCollect can help you eliminate late payments,  talk to us today and one of our AR experts will walk you through options for your business.