Getting Paid On Time in 2016

It’s hard to believe that December first has arrived and the year is coming to a close, but it’s true and the time for planning and preparing for the year ahead is upon us all. For CFO’s, Credit Managers, Controllers, and other financial executives, that means reflecting on performance in the last 12 months and making plans to strengthen weaknesses and capitalize on strengths in 2016.

This is the first half of a two-part blog that will help you reflect on your accounts receivable management performance over the last 12 months and help you formulate a plan for improved cash flow and collection performance in the New Year.

 Measuring Metrics

How did you do last year overall? did you meet your goals for days sales outstanding, average days delinquent, collection effectiveness index, overall bad debt, accounts receivable turnover ratios, or any other metrics you’re tracking? How do you measure up to your peers?  Did you even have goals defined?

For many companies tracking and measuring success at the end of the year requires a significant investment of time and energy in crunching numbers, building spreadsheets, and looking for information. While taking a look at these facts and figures at the end of the year is smart, these metrics should be tracked and benchmarked against all year long if you truly want to improve A/R performance. So if you find yourself completely overwhelmed at the thought of figuring out where you stand, consider implementing a reporting tool or accounts receivable dashboard in the New Year.  This blog explains more about the growing popularity of these solutions and what exactly it can do for your organization.

 Identifying risks/opportunities in your current process

Where do you see your biggest invoice collection problems coming from? What are the most common reasons behind late paying or non-paying customers? Maybe you’re not careful enough about who you’re extending credit to or what terms you give customers; or perhaps you’re not getting invoices out quickly enough, or sending incorrect and incomplete information. All of these are very commong, relatively easy to fix, and offer a huge opportunity for you to reduce late payments and costly write-offs. Here are three additional resources to help you learn more.

All of this reflection and research into you’re A/R can get to be incredibly overwhelming; so let’s stop here for now.  Be sure to walk through these first couple of steps to identify where you stand today and identify any current weaknesses or strengths within your collections process today. Write them down and check back later this week. In the second half of this article we’ll touch on what you can do with that information and how you can use it to make a solid plan in 2016.

In the meantime, pick up some more tips, tricks, and accounts receivable best practices in our Resource Center. Click below to take a look.

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