While it is true that each individual department plays a role in increasing the cash flow needed for sustained profitability, the real work falls on the shoulders of those responsible for collecting invoices. How long does it take for you to collect an invoice after it’s mailed? Have you ever thought about how you can improve your processes and systems to shorten that cycle and improve cash flow? Take a close look at your current process for managing collections, is it mostly manual? If so, you and your organization stand to benefit greatly by learning more about AR management automation software.
Kicking your manual ways to the curb can be a hard idea to grasp, but Business Credit Magazine recently spoke with our company and panel of other A/R software professionals about why automation truly is a better way to run the credit department, here are the highlights:
- “Automation makes the credit department agile and active.”
- “A/R is sort of the forgotten department. 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”
- “It presents your company as being flexible”
- Inc Magazine also reported that “A solid accounts receivable system has a tendency to being self-fulfilling: The more professional your billing system is, the more likely it is that your clients will pay up in a timely manner.”
So with all that being said, why are so many companies dragging their feet when it comes to automating the process to improve cash flow?
In some cases it is because they are ok with managing the process manually because it’s how they have always done it- they’re ok with status quo or they fear the unknown. We know it can be scary to make such a big change, so we put together a little something to help you get over those fears.
More often though the hesitation to automate is because organizations simply don’t understand the benefits these systems have to offer. For example, improved cash forecasting is another benefit of automation with reports of cash flow forecasting improvements with more than 90% accuracy after automating the process.
Many vendors report that their customers are seeing a 20-25% reduction in DSO after using the software for only one year with a 10-20% reduction in later years. This kind of result will pay for the software over and over again considering how increased cash flow will reduce financing costs, bad debt, etc.
Reduction in DSO is a result of many factors, especially the improvements in AR management productivity. For example, roughly fifty percent of a credit department’s time is spent collecting data to analyze disputes when manual processes are being used. Software can do that for you to free up human capital to be used elsewhere. “Automate the processes you can so you can spend more time communicating with people and making decisions. This is where the promise comes in automating A/R.”
AR management automation is not the only way to improve credit collections and reduce DSO. Learn some surprisingly simple, yet super effective strategites in the white paper below.