According to a survey conducted by Genpact and CFO Research, only 27% of companies collect 90% or more of their total yearly sales within payment terms. The remaining 73% struggle with timely credit and collections, suffering consequences such as slow cash flow and insufficient working capital. Why are such a large portion of companies having such a hard time getting paid on time? The research says these troubles are usually rooted in one or more of the following issues:
- Too much reliance on ERP systems that do not deliver the required information organizations need for optimized credit and collections processes.
- Difficulty and/or inability to take A/R data and turn it into action.
- Lack of an effective and tailored strategy for collecting unpaid invoices.
The survey results go on to explain that CFO’s identified improving credit and collections strategies as one of their top priorities. Here are a few suggestions and resources if any of the above points sound like a familiar pain pint in you A/R department:
- Too much reliance on ERP features and other systems that do not really help you increase efficiency or effectiveness? Enhancing your ERP system with an accounts receivable automation module can help you centralize all of you’re A/R data and tools in one place so collection professionals can become more productive, reallocating time away from looking for information and keying in data, and more time on value-added activities.
- If data accessibility and interpretation is your problem, consider an A/R management module that includes a dashboard so managers can quickly get up to speed on the state of A/R. With the right credit and collections system you will also gain insight into projected cash receipts, expected payments, broken promises, advanced reports, and more so you finally have all of the information you need at your fingertips to make better, faster decisions.
- If disconnected and ineffective techniques and tactics tailored specifically to your business and customers are at the heart of your problem, it’s time to come up with a new plan. Do you have a credit and collections policy and action plan in place? This is a huge help for companies trying to get organized in A/R as it clearly defines the rules, regulations, and procedures your company used to manage daily operations so that sales and collections employees conform to documented steps and procedures designed to optimize your resources, reduce credit risk, and improve overall cash flow. Many companies do not currently have a policy and plan in place, so we developed a guide to help you get started, “6 Steps to Developing a World Class Business Credit Policy & Collections Action Plan.”
While following the three points above will indeed help you improve collections in your company, there are many other even easier ways you can start making changes for better performance outlines in the white paper below.