How To Make It Through Economic Uncertainty by Digitizing Accounts Receivable

In the last eight months, we’ve all learned that the future is anything but certain.

The economic instability businesses have had to endure due to COVID-19 highlights the need for a predictable cash flow and greater control of working capital. One way you can support this is by optimizing the cash in part of the equation—your accounts receivable (AR).

A new report from the International Data Corporation (IDC) titled “It’s Time to Transform Accounts Receivable” highlights how transforming dated approaches to AR with cloud-based technology can help businesses unlock cash flow and stay resilient to future challenges.

In this blog, we’ll delve into key opportunities IDC highlights for digitizing your AR, and how this can better equip your business to withstand the whims of today’s economy.

Get A Complete Picture of Your AR

As businesses respond to the economic challenges of COVID-19, senior leadership increasingly leans on finance teams to inform their decision making. A Gartner survey from April of this year found that seven out of ten finance leaders reported conducting cash flow forecasts more frequently and 75% of finance leaders stated that they were reporting to the C-Suite at least once a week.

In order to accurately report on your business’ financials, you need a clear view of all your AR activities. For finance teams that refer to multiple data sources—whether it’s your ERP, bank lockboxes, ecommerce sites, or even spreadsheets—this is easier said than done.

When you’re preparing to report to senior leadership, it’s not efficient to have to manually run and export reports from separate platforms to calculate key metrics like DSO.

An AR automation solution with strong reporting capabilities can eliminate this friction and ensure you’re always accessing the most accurate data. Look for a solution that can break down your AR at the company, division, invoice, and line-item levels and puts metrics like DSO and ADP front and center. Integration with your ERP should also be a prominent factor in selecting a vendor.

Focus on High-Value Activities

Having a detailed view of each of your customers’ account standing is particularly helpful for determining where your AR team should spend their time. 

Another way to free up time to connect with the customers that most need follow up is to automate time-consuming collections activities. Instead of calling and emailing customers to check on the status of open invoices, deliver personalized notifications to your customers at various points throughout the collection cycle, reminding them to pay.

In periods of economic uncertainty, CFOs will want to focus their team’s efforts on the activities that drive cash flow optimization. Fast-tracking collections naturally falls into this group of high-value activities and businesses that heavily rely on manual AR processes will struggle to achieve this.

Reduce DSO

Not surprisingly, reducing DSO is a core strategy for maintaining business continuity in periods of uncertainty. Embracing digital transformation is essential for any finance team working towards DSO reduction. PYMNTS.com’s recent B2B Payments Innovation Readiness report found that businesses that rely on manual AR processes tend to have 30% longer average DSO compared to those with medium to high levels of AR automation.

Beyond streamlining your collections activities, there are other ways you can incentivize customers to pay you faster. The first is making it easy for customers to know what they owe you. Offering a variety of invoicing formats like email, within an online portal, or direct to AP portal lets customers choose the option that’s most convenient for them and as a result most likely to get them paying promptly.

The second is making it easy for customers to pay you. B2B buyers increasingly expect their payment experience to mirror what they encounter as consumers—meaning online.

If you’re hesitant to increase your acceptance of digital payments because of high processing fees, there are options that can take care of this concern. Working with a payment processor that provides interchange optimization helps with lowering processing costs, making accepting a high volume of card payments more feasible.

Minimize Workload Without Adding Headcount

Adding headcount to solve operational challenges isn’t practical for many companies right now. With sufficient AR automation though, you can increase efficiency and streamline workflows even with a lean finance team.

A recurring challenge for most AR teams is manually having to match payments with open AR, especially when they come with minimal remittance data. You can automate much of the cash application process with tools for auto-matching like portal crawling, inbox scanning, and OCR for extracting remittance data from your various file types and reconciling it with the appropriate payment.

Getting customers to pay you through an online portal is also a great way to reduce your efforts spent on cash application, given that online payments made through a payment portal capture complete remittance data at the same time.

Maintain Strong Customer Relationships

An area that many businesses tend to overlook that will play a critical role in helping them emerge strong through the economic downturn is customer experience.

If previous crises can offer business leaders any direction on how to handle the current situation, it’s that focusing on customer experience is a winning strategy. Research from Forrester found that during the recession from 2007 to 2009, businesses that led in customer experience had returns that were three times higher than businesses that fell short in this area.

An aspect of your customers’ experience that shouldn’t be ignored is how you bill them and collect payment. With remote work likely being a fixture for most businesses well into 2021, you should make the transition easy on your customers by optimizing how they manage their payments and interact with your AR team.

Giving your customers an online self-service portal empowers them to take control of their account preferences and find any information they might need—anytime, anywhere. An online portal is also a great vehicle for enabling direct communication and collaboration with your team, making it easy for both you and your customers to clear up questions and potential disputes.

Not even the most seasoned forecasters can definitively tell us what to expect as we navigate the economic fallout from COVID-19. But, this doesn’t mean businesses are powerless in the face of uncertainty. Organizations that prioritize transparency, flexibility, and visibility into cash management by transforming their order-to-cash processes will be better prepared to handle whatever comes their way.

For more insights on how digitizing your accounts receivable processes benefits your business and customers, you can download IDC’s report “It’s Time to Transform Accounts Receivable” for free here.

Published by Nicole Bennett

Nicole is a Content Writer at Versapay and a recent English grad from the University of Waterloo. She is passionate about generating value for customers and businesses through authentic and compelling storytelling. Before joining Versapay, she completed several internships in SaaS, financial services, and higher ed.

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