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MASTERCLASS SERIES

The Ten Gifts of Accelerated Cash Flow: How to Unlock Them Through O2C Optimisation

Webinar Transcript

Select the tabs below to read the transcript of different sections of the webinar. Or check out the webinar blog post for the key takeaways.

Introduction

Arjun (AJ) Singh: 

Today’s topic is the 10 gifts of accelerated cash flow and how do you unlock that through the order-to-cash process. So we’ll go through that. We’ll explain what all these big words mean and how you can break it down for your business. So let’s get started. Just to kick off, we’re very, very lucky to be joined by Amanda. So, Amanda, I’ll let you do your own introduction here, and then I’ll go into mine.

Amanda Lee:

Thanks, AJ. It’s lovely to be here with everybody today. So I’m a receivables management advisor who’s been in every industry for the last 16 years. Specifically, what I focus on is people, and money is the result. So really looking at your receivables as a gold mine, somewhere where not only is it optimising cash flow really important and systemization, but also looking at people.

Arjun (AJ) Singh:

She helps us with our clients, making sure our product is always focusing on that human element and not just the whole automation of the AR process. 

Just a bit about me. My name is AJ. I’m the co-founder and CEO. ezyCollect is very much a labour of love because I started this business out of the pain of running a business myself, a wholesaling/manufacturing business. Having dealt with the pain that slow cash or late payments have on cashflow, ezyCollect was very much a solution to the problem and looking at the whole process from the day you get your first order from a potential customer to the day you get paid, that’s where we try and solve that particular problem as a platform.

So, today, we have 1,200 clients in about 18 countries. It’s about 70 staff today. So we really are, I think, living our mission of trying to eliminate late payment on a global scale. 

Session’s agenda

Arjun (AJ) Singh:

Today, we want to focus though specifically on how can we help you unlock that sort of cash flow stuck in your order-to-cash process. So today’s agenda is really, number one, as I said, talk about what is order-to-cash. It could be a technical term for some of you on the call. So we’ll explain what that means and really what is the cost of the cash stuck in that process, and then we’ll spend most of the webinar talking about how do we unlock that cash. There are a lot of things you can do, but we’ll focus on three key areas of focus that if you do these, you can absolutely turn around your business in terms of cash flow for the positive.

Arjun (AJ) Singh:

Of course, any questions you have, please use the Q&A chat box as you go through this webinar, and we will address them at the end. Now, I think before we get into the webinar, we want to launch a poll. Amanda, I think we’re talking about this earlier. Do you want to talk about this, this poll? What do we want to learn from, I guess, from all of you on the call?

Amanda Lee:

Well, basically, what we want to learn is how we systemize our cashflow and receivables to actually get the most out of it from a human perspective as well. 

So what areas in your business need the most attention? So what AJ and I were talking about when we were thinking about this webinar was there are always pain points in your business, and even if it’s not your receivables, it might be other areas in your business. But today, a lot of what we’re going to talk about may apply to those areas as well. So we want you to just start thinking, now, where in your business are you feeling some cashflow pain? That’s really what we want you to do because it might be somewhere else.

Arjun (AJ) Singh:

Yeah, and I think it’s also like even though ezyCollect focuses on cashflow, as a business, we care about businesses as a whole, right?

Arjun (AJ) Singh:

Cash might be the issue today, but is it your staffing? Is it getting more sales? I know that ezyCollect… I’m always worried about cashflow, but I’m also worried about getting new sales. I’m worried about, “Are my staff engaged? Are we able to work in a good remote workspace?” But all these things, we want to learn as well, and we can try and understand that so we can help you ultimately with improving cashflow.

So we can share some of these results, but just the initial feedback is almost 60% of you looking to automate manual processes. There’s no surprise 33% is around risk management, which in this economy is completely understandable, and 33% is about getting new sales. Right? Which I completely get. What I am surprised about, is that staffing is actually quite low. It’s not a high level of issues for people today. In this environment, getting good people and retaining them is something that I always think about as well. But it’s quite interesting to hear from all of you that that’s one of the lower items on your mind at the moment. Okay. So we’ll keep the poll open for about a minute or so. You can minimize that if you like once you’ve completed it, and I’ll get into now the actual webinar.

What is O2C?

Arjun (AJ) Singh:

So let’s kick into what is the order-to-cash process or we call O2C. It’s a bit of an American term, but it’s also a term that’s being used more and more. If you’ll read this particular chart, it goes in a zigzag like up, down, up, down just when you read this. But really, what we’re trying to say is the order-to-cash process is really all the steps in a business on the AR side. When you first want to work with a customer, how do you approve credit? How do you decide who to extend credit to?

Arjun (AJ) Singh:

Once you get that, then, of course, you need to be able to get the order. Have you given them terms? Is it cash on delivery? Then, once you’ve got the order, how do you fulfil it? That could be going to a different department. Then, you have to invoice them, right? Once you invoice, you have to make sure you collect and get paid when you need to get paid because a sale isn’t a sale till you get paid. Then, once you get paid, there’s the back office. How do you apply for their payment? It’s called a cash application. How do you reconcile the books? Then, finally, how do you report that in your P&L or your balance sheet?

Arjun (AJ) Singh:

So, I mean, the point of this diagram really is there’s a lot of manual steps, right, Amanda, and there’s a lot of places where there’s a lot of friction and frustration. Amanda, you’ve managed businesses from a finance and AR point of view for, like you said, for 20, 30 years. Where do you see the biggest points of friction here?

Amanda Lee:

The biggest points of friction here are the room for error. When a lot of processes are manual, errors are one of the biggest issues that I find in businesses in their receivables. The other issue is lack of automation. So people are actually doing too many tasks physically that can be automated in the background. So time can be spent on more crucial areas like managing relationships or doing other processes that are more important within the job. I’m a big fan of automating as much as possible. So when you’re focusing on that human component, it really receives major focus.

How O2C affects AR & Payment Collections

Arjun (AJ) Singh:

Yeah. So with this sort of order-to-cash process, I mean, that’s right. This is what it is, but what is the cost of it, right? What is the cost of the order-to-cash process?

Amanda Lee:

Yeah. The cost of it can be significant. So depending on your business and what other debt, or bridging finances, or overdrafts you may already have, the cost of carrying an overdue debt can also be balanced against the cost of onboarding customers, et cetera. But from the moment somebody places an order with you until they pay the bill, what is the cost of the process in between? What’s being held up? How’s the customer service being affected by that? So the cycle here is really vital for so many important points.

Arjun (AJ) Singh:

Look, there’s a lot of FUD, as I call it, Fear, Uncertainty, Doubt, today in the economy, and businesses are hanging onto their cash. So even though you might [inaudible 00:11:43] this diagram here, you might make a sale here, right, and you expect payment here. Businesses are extending that more and more, and you might expect, “Hey, I’ll have 30, 40 days in receivables before I actually get paid.” But what we are seeing is people are delaying payment more and more at the moment because they’re just not sure about their own cashflow position, and it’s causing a small blowout in certain industries where DSO, Days Sales Outstanding, is actually increasing, which is scary, but I think it’s also a reflection of the environment today as well.

Amanda Lee:

Yes, and the other thing is it is quite scary because if you’ve already got receivables that are a little bit blown out and you’re operating at maybe 30%, 50% of your ledger constantly overdue, how are those numbers looking now when you’re having times when people are delaying their payments even more? So that’s why it’s really vital to make sure that we’ve got receivables up to date all the time because there’s always going to be times in business when people do drag out payments. So we’re in really volatile times at the moment, and 2022 is still going to be volatile. So that’s why this is really vital information for anyone that’s on here today. We need to focus on these cashflow flow cycles.

Arjun (AJ) Singh:

Yeah, and if we make it a bit more real… So I won’t to go into an actual cashflow calculator. There’s lots of public stuff out there, but fundamentally, if a business is turning over, let’s say, $10 million a year, right? If you could reduce your DSO, your outstanding days by, say, 10 days, which is a fair amount, right? But by 10 days, it unlocks about 1.2 million in work. It’s just working capital in that year. Right? So forget the other benefits of getting faster payment, less finance costs, less overdrafts, less da, da, but just the working capital money you have in your account to do more with, to buy more inventory, which means you can get more sales, which means you can grow your business faster. But what we want to talk about is there’s a cost, and there’s a very hard cost here of having longer and longer payment times.

Arjun (AJ) Singh:

So what we want to say today is how do you unlock that? How do you unlock and reduce for that payment time? In 10 days, we can absolutely help you with, right? But for your business, it has a very measurable and a real impact, right? Instead of you acting like a bank, right, it’s time for you… and I don’t think it’s all doom and gloom now. I think you’re on this webinar, you’re investing time to learn about this. We’ll make this time very, very valuable for you, and we’ll make it count and show you, show you how you can actually reduce your DSO and run a better business.

Amanda Lee:

AJ, I’d just like to say here a lot of businesses actually don’t calculate or understand what it costs them to carry debt in their receivables ledger. So if you can make people pay you faster, not only is your cashflow better, but you’re saving yourself a significant amount of money. A lot of business owners never calculate what it’s costing them to carry that debt. It may mean a lot of you have got overdrafts or other kind of finance to actually be able to pay your creditors because your money is literally stuck in your receivables ledger.

3 Critical Areas of Focus

Arjun (AJ) Singh:

Okay. So let’s get into this now, and look, we want to unlock cash and deliver the gifts of faster cashflow. There are lots of things we can do in that order-to-cash process to actually help, but we want to focus, for the sake of time, three key things today that you can take away, and then we’ll talk about what are the 10 gifts that you get from those three things. 

So I guess the very first thing in that order-to-cash process, which we can’t ignore is how do you make sure you work with the right customers in the first place so you are onboarding good customers and not just onboarding bad debt, right? How do we mitigate the risk? 

The second point, which I’ll let Amanda talk about is what we call humanized collections. So, Amanda, you’ve got here that you can improve sales and collections by up to 70% within three months by humanizing your collections. Can you explain what you mean by that?

Case study: Improve collections with effective communication

Amanda Lee:

Yeah. So we can turn any ledger around in 90 days, and the reason we’re able to do that, regardless of how poor your ledger may be, is because we are focusing on the human aspect to your receivables. Why aren’t they paying? What are the circumstances? Do you even have a relationship with them? What’s your communication and connection with the customer like? So when I talk about humanized collections, you can break that down to communication and connection. How connected are you to your customers? Are you delivering what they want?

Amanda Lee:

If you don’t know why someone isn’t paying you on time, then it’s actually your fault, not the customer’s fault. So we have to be communicating with them. 70% is even a bit low as you’ll see later on in this example. We like our customers, our clients to have 98% to 100% collection rate every month by the 10th and 15th of the month. So that’s actually unheard of for most businesses, but we’re going to show you how to do it.

Arjun (AJ) Singh:

Yeah, and this is one of Amanda’s businesses that she’s currently managing where you can see this is actually real. This is real data, right, Amanda? I’ve taken you took the screenshot, I think, yesterday or the day before on this.

Amanda Lee:

Yes. This client uses ezyCollect. That’s why I use this example. So it’s nearly a $5 million ledger, and as you can see, their overdue balance is $1,300, which would be little anomalies here and there. So if you’ve got a $5 million ledger, compare that to perhaps what your overdues are right now, and what difference would it make to your business if you had that money in the bank and only had $1300 outstanding?

 

Arjun (AJ) Singh:

But this is amazing. I think this is the gold standard, right? Then, number three. So one is how do you help your onboard? Area one. We’ve gone into a bit of depth there. Number two, how do we humanize your collections? So we’ll actually explain what we mean by that. Number three, how do we take away the friction so that your clients can pay you, and then how do you reduce your back office work so that you reconcile that payment, and you save time and effort? These are the three areas we’ll focus on today and go into a bit of detail. Again, if you have questions, feel free to use the chat, and we’ll get to all those questions at the end off this webinar.

1. Best practice credit approval

Arjun (AJ) Singh:

So number one is really about trying to mitigate risk. Like we said, in this environment, it’s all about making sure, as businesses are coming back online, there’s… Hopefully, this strain of the virus is over the hump. You’ll see businesses coming out, and some of these businesses may not be viable businesses that are trying to get credit from you. How you decide to add these customers and onboard them is really, really key in this time for cashflow. So before you even talk about humanized collections, or chasing or managing payments, we really need to manage risk. Right? I think in the survey results, one of the key feedback from you was that the second most important thing was actually risk management, right, in terms of how do you manage your business. So if risk management is really key, this is number one for risk management.

Arjun (AJ) Singh:

Now, extending I guess trade credit is something which most people do today very, very manually. Right? I know it matters, at least my story in my last business. We used to send our clients, when we had a new prospect, a PDF, like a physical… Back then, it was actually an actual paper. But then, we would then email that as well. Offer a PDF application form. Right? It had your basic director details, trade references, bank details, and it was just them filling up a form. Based on that and calling a couple of trade references, I would typically extend credit. Is that what you see today as well for a lot of businesses?

Amanda Lee:

Yeah. I still see far too many manualized processes in this area. Look, the biggest issue is, number one, what I see in some companies is the person that is doing the onboarding may not have a significant knowledge around trust structures or company structures. Therefore, they don’t really know what credit checks to do, or a lot of companies might get the application filled out. They make a couple of phone calls based on the credit reference the customer puts down.

Amanda Lee:

Well, no one is going to put down someone else they’re dealing with that they don’t pay on time or they pay poorly. So that’s not really a credit check. So having these systems so that you can automatically credit check customers or they’re automatically approved, and recommended credit limits are supplied to you. These are things that are invaluable. They’re easy to do, and it’s actually giving you professional assistance in the background that normally you wouldn’t have. So this is where manual processes now are dangerous. They must be automated.

Arjun (AJ) Singh:

Yeah, and the more, I think, you can build your first touch with this customer in a really professional manner, it also increases your trust in your brand as well. Right?

Arjun (AJ) Singh:

Right? So what we’re trying to say here is onboarding now in this environment needs to be more data-driven, right, and more automated, more streamlined so that you’re building trust and you’re making better, better, better decisions. So keep going, Amanda.

Amanda Lee:

Yeah. I was just going to say it is the adage, and it’s true. Start off the way you mean to continue. If you onboard a customer in a sloppy way, if you start giving them goods and invoicing them before they’ve actually got a proper trade account that you’ve approved and sent them a welcome email with an approved credit limit, they already know that you don’t operate the way that you should. So straight away, they know the corners they can cut. They know where they can push and get some leverage out of you. So make no mistake that psychologically, everything you do with the customer is sending them a message of how you operate your business.

Arjun (AJ) Singh:

Yeah. Yeah. So just very quickly, what we try to do at ezyCollect is give you the tools to, A, digitize your application form and B, use data every step of that process. So what I’ll show you in just maybe a minute or two, this is the ezyCollect platform here that you can see, and what I’m showing you is the view where you can come in as a business, and you can set up some rules around, “Okay. I want these terms and conditions, these privacy policies. I want this branding,” and you can very quickly white label an application form, right, with your brand. You can then send this to your customers, and when they actually get this… and this can be actually on your website as well. So a lot of our clients have on their website, “Apply for trade credit,” click a button, and they have to download a form.

Arjun (AJ) Singh:

Now, instead of downloading a form, you can see a digital form, and a customer would then actually come in here or a prospect, and they’d see this is the brand that you are representing. “This is who I’m dealing with. These guys are using latest tech to actually onboard me as well. So this must be a very professional business.” They can request a credit limit. They can put in their address details, their director details, any trade references, and we, of course, pre-fill information using the data we have, but that’s just step one. Right?

Arjun (AJ) Singh:

Step two then is when this comes back into… Once it gets completed, you as the finance manager or the AR clerk in the back office can actually come in here, and then view a completed application form, and see what was actually filled in. You can see what were the trade references, what was the director’s name, and you can then start to use data to make better decisions on whether you want to extend credit or how much credit you want to extend because what we’ve done here is we’ve supplemented the information they’ve provided with external data from trade reporting agencies. Those agencies experts at what they do, right? They’re risk agencies. They assess the risk of businesses all throughout the country, and then we present those scores to you so that you’re using data to make better risk decisions. Amanda, do you want to add to this at all from your experience around using this?

Amanda Lee:

I think that these screens are absolutely beautiful screens, right, because this is what people… This is what companies need to embrace. They need to embrace data as their friend. I think sometimes in the receivables space, years ago, it was a bit of a tough gig trying to get credit reports and making up all these decisions yourself, but having all this data at your fingertips just gives you so much knowledge, and you really are able to onboard a customer with such great risk management right from day one. It makes your job easy. So I always encourage my clients. I won’t work with a a client that doesn’t have these processes in place or we get these processes in place for them. It’s just literally vital. This is the blood of your business. Right? It’s what keeps you alive.

Arjun (AJ) Singh:

Yeah. So, I mean, it basically is showing you that having a process really, really matters not just for risk, but for delighting your customers, building a brand, building trust, right, and running a professional business. So that’s number one. So one takeaway here from this webinar is think about your onboarding for new customers, especially coming out of the pandemic, fingers crossed, into this new world. This is not something which I think is nice to have. I think it’s a must-have for every business. So step two is about humanized automation. Amanda, I’ll let you run with this as the second key focus area.

2. Humanised Collections

Amanda Lee:

Okay. Sure. So humanized automation, and the reason we create such great success for our clients in the receivables space is because the squeaky wheel gets the oil, right? We’ve all heard that. It’s very important today to understand that communicating with customers isn’t to be seen as you annoying them, or they already receive enough messages from your business, or they get marketed to all the time. When it comes to talking to people about money, it’s a very different thing. These are the issues that we have. Humanized automation is so important because there’s always a human element to receivables or to business, full stop, and there always will be. But if you automate as much as possible, right, then the human aspect actually becomes a very high level aspect. So the communication and connection is really powerful. So this gives you a real lift out of the pool of other businesses.

Amanda Lee:

The customer sees you as different because they have a connection with you they don’t have with other businesses. They’re allowed to talk to you and be free with their communication, and they’re not punished for it. So when you look at what I’ve got here, the 30%, 80%, 100% rule, right, that doesn’t make sense, but this is why it does. 30% of people are always going to pay on time. One little reminder, automated message and they’ll pay, right? EzyCollect has got the communication flow that you can set up, and every month, I change these so that the customers don’t get used to seeing the same thing, and then they start ignoring them. It’s really important that automated communication is updated on a regular basis. Just slightly change the wording so it’s fresh.

Amanda Lee:

Then, to get to 80% of people paying and collecting that money, right, there’s going to be probably a little bit more work involved, and that will be maybe it will take one phone call, but it’s going to take some sort of human interaction. Then, to get that last 20%, that’s the tough gig, right? So that last 20%, it’s going to take… There’s clearly something wrong. So whether they’re upset with a salesperson, or they’re upset with an invoice, or they haven’t received the right price, or something is wrong, but you need to contact them and find out what’s wrong. That’s where the communication and connection makes all the difference. Right? So having a ledger that’s 100% collected every month is the goal, and having a communication workflow like this means that you are not having to physically communicate with everyone, but those that need more, well, you can focus on those that need more, and ezyCollect tells you who those customers are.

Arjun (AJ) Singh:

Yes. Amanda, I think from speaking to you in the last few years, it’s all about having… I think from my understanding of what you said as well, it’s about having a continuous flow of communication to your clients, right?

Arjun (AJ) Singh:

That’s where automation is really important. So you need a level of automation in your business to automate your flow of communication, that continuous flow. I think it’s a very valid point. Once you set up a flow, don’t just leave it. Keep looking at it every, say, three, four weeks and changing the words in the templates so that even if the templates are personalized automatically, it’s even more personalized, right?

Amanda Lee:

So, for example, please don’t send automated messages out that say, “Dear accounts.” Right? You can’t connect with people if you’re calling them “accounts.” “Hi, accounts. How you going?” No. You’re better off just saying, “Hi,” right, than saying, “Hi, accounts.”

Amanda Lee:

You should know the person that you’re communicating with in that business with regard to accounts. If you don’t, that is actually a sign of a poor onboarding process. You don’t know your points of contact.

Arjun (AJ) Singh:

Spot on. I think that’s a really, really good tip, and then the fact that you can have the continuous flow of information is fine, but a human element that you mentioned, like you can see here, having a call, that’s not an automated step. It’s an automated task for you as the accounts person to say, “Hey, call these people today,” but that has to be a conversation. That’s how you get from 30% to 80% collection. Right?

Amanda Lee:

This is how I view automation. I want to personalize that automation for my customer, for that customer. Never think of automation as a blanket message going out to everyone. You must write that message as if you’re writing it to one person. That’s the tip for automation.

Arjun (AJ) Singh:

That’s right. That’s a good tip. A good tip. Of course, when someone pays, thank them for their payment. That’s really important, but the actual calling as well. Let’s go deeper with the calling. Right? So how do I know, Amanda, I have to call these people today? EzyCollect will give you a list. So you can see, here’s an example of an email that will be sent to you in the morning saying, “Call these people because they’ve hit that, I guess, humanized step in the workflow,” and they can see the calls they have to make.

Arjun (AJ) Singh:

So I know, Amanda, before I go to this, a lot of people say, “I don’t have time to make calls,” and that’s a number one reason we hear from all our customers. So they let the automation run, and if a call doesn’t happen, it can keep going. The automation doesn’t stop. It can keep going if someone doesn’t make a call, but calls are really important. I mean, talk to me about how do you make effective calls using data and also, how you make effective calls generally.

Amanda Lee:

So like everything, it’s about balance. If you want automation to do the whole job for you, it’s actually going to lose you business, and your receivables will, over time, eventually blow out. So when you start using automation… I think, AJ, you’ve got figures on this. When you start using automation, your collection process will improve. But if you solely just keep using automation, those numbers will then start imploding again and going backwards. Right?

Amanda Lee:

The reason for that is if you’re never communicating with your customer about an overdue account, they feel like a number. They feel like you don’t care. All they think psychologically is that, “Oh, once they’ve got the goods and you’ve made the sale, you don’t care.” Right? So you have to understand that the customer relationship has to continue until you actually receive payment. If you’ve got trade accounts, which obviously you do, and it’s a cycle, then this cycle can never be left just to automation. It’s not right, and what it does is the customer feels completely isolated from your business, and they feel like a number. They feel like a machine, and so therefore, you’re no longer a priority to them.

Amanda Lee:

So guess what? You’re not one of the first people they think of when they pay their bills every month.

Arjun (AJ) Singh:

So let’s go with an actual example here. Let’s get some detail to the folks on the call. So we’ve got this screen here, right? 

Arjun (AJ) Singh:

Amanda, you’re actually making calls. You’ve got this 0.01% overdue. You could see here your clients. I’ll give you a tough one here that I haven’t discussed with you earlier. Someone has a high risk. You can see here because we have data here that we’re bringing into the actual calling task. So it’s a high-risk customer, right?

Arjun (AJ) Singh:

Meaning, that they’re paying you guys as in they’re paying the market on time. It’s showing that the late payment is low, and they’re paying the market on time, but they’re paying you late. So it could be a potential relationship issue with your business. Right? So how would you tackle this particular customer using the data that you can see on screen?

Arjun (AJ) Singh:

It’s up to the sixth step, right? So they haven’t paid. Last step. Go for it.

Amanda Lee:

Well, last step. Obviously, I would’ve communicated with them before this last step, but that screen you were showing previously, AJ, that’s what I love calling my “stats to chat screen.” Right? The reason I call it that is because when ezyCollect red flags somebody or they’re considered a high-risk, I see that as an opportunity to really connect with that customer and ask them what’s happening for them. How do we help? How do we assist them? How do we keep the cycle of continuing to sell to them, which is really the goal, right? Continuing to sell to them while still getting the money in the door. How do we assist them with that?

Amanda Lee:

Now, I have a very unique concept around this. Most risk management will tell you, “Put an account on stop and stop selling them goods if they’re not up to date.” Right? I disagree. So part of risk management is actually continuing to sell. How do you continue to sell while you manage the debt that that customer has and make sure there’s regular payments coming in and a definite date that they will be up to date? So that screen is vital, and it’s telling you there’s something wrong here, but it doesn’t mean that it has to be the end of the world or it’s necessarily going to be a bad debt. But if you ignore it, 100% it will be a bad debt.

Arjun (AJ) Singh:

Yeah. So you’re saying working with the customer, understand what’s the blockers. How can we assist them? How can we start getting some regular payments in?

Amanda Lee:

That’s right, and this is a thing. In business, we’re all human beings, right? Your customers are people. Life happens to them too, even if they’ve got a very successful business. In these times, we actually don’t know what’s happening with businesses now. You don’t know how their cashflow is. So we’ve really got to be communicating with our customers as soon as we see any signs of a change in payment behaviour or even a change in sales behaviour because if the sales behaviour changes, then that will flow through to their payment behaviour. So that’s why sales and receivables should work together very synergistically rather than butting heads against each other, which we see in a lot of organizations. One of the things that we fix is actually the culture internally so that the customer is getting the full gamut of service.

Arjun (AJ) Singh:

Yeah. I’m looking at the chat box. I’d love to hear from you all on the call. What are some tips that you have on getting customers who you think are high-risk to start paying? We can share that on the call at the end with some of the others so we can build a community here so we can all learn from each other on what are some of the tips. No one is an expert 100% here. All want to learn.

Arjun (AJ) Singh:

The one thing that we see a lot of usage in the system is when people want to automate a thank you message when someone does pay. Even though it’s an automated thank you, people I think do like that, and you can automate that message in the thank you as well to be a bit more personal, which is going to only help with a humanized connection too.

Amanda Lee:

Yes, and as they say, people don’t remember what you say, but they remember what you do and how you made them feel. So sending a thank you message might seem a little bit pointless or silly, or it’s just another email to somebody, but it’s actually not. What you’re doing is thanking them, and it’s connecting with them because if you’re only ever communicating about their overdue account, but you actually never say thank you for a payment, it’s a little bit one-sided. So the thank you notes, the thank you emails are, as you know, AJ, they’re one of my big things, right?

Amanda Lee:

Thank your customers for their payments.

Arjun (AJ) Singh:

So one of the questions that have come up here is people want to know if SMS messaging is effective at the moment. Through the system, you can do text messaging or SMSs, but is that effective in a business-to-business context, do you think?

Amanda Lee:

100%. So if you’ve got the point of contact and you’ve got direct mobile numbers, SMS is actually the fastest open form of communication. Actually, it was last year. I don’t know if it changed, but the general rule is people read a text message within three seconds of receiving it. Right? So text messages are very effective, but like anything, don’t just use text messaging. Combine it with emails as well plus text messaging, plus human contact, a phone call.

Arjun (AJ) Singh:

I think data is a big issue here. People don’t have the mobile numbers off the AR person. It’s a very private thing. I think it’s nice in theory to say you could text message people, but I don’t know how you do it in practicality because businesses… You’re contacting someone’s private mobile potentially.

Amanda Lee:

Yeah, that’s correct, AJ, but what you find now, a lot of businesses do operate on mobile phones. Landlines, et cetera are more so for receptionists now, but most people in business now have a mobile phone. AR departments may not have a mobile phone, but this also depends on your demographic of customer, obviously.

Amanda Lee:

If you are in construction or in an industry where most people are a direct contact or businesses, the guys all have mobiles or whatever, then it’s very effective. So, once again, this information, it’s relevant to the industry that you’re in.

Arjun (AJ) Singh:

Yeah, same thing. I’d love to hear from everyone on the call, what you guys think as well because there’s something which we keep debating at ezyCollect. Do we invest more in SMS messaging to help our clients collect, or is it something else? Is it a better method? But the point is, anyway, from this humanized automation slide, it’s continuous communication. Have the human elements during the step. Personalize your templates. Don’t leave them there forever. Write emails like you’re writing to an individual person, and work with the customer so you understand what’s the actual pain point, and start even drip feed payments coming through if you need that to be happening.

3. Frictionless payments

Arjun (AJ) Singh:

So the third point that I think to focus on today, and we have only about 15 minutes left from this webinar, is about making it easy, both for your customers and then for yourself to accept payments online. Online payments I think has been the biggest shift in this last 24 months during the pandemic where businesses are all working in a hybrid fashion, and you need to be able to cater for them to pay. I know for some of our US customers, sending checks almost dropped by 50% because there was no one send checks too. Right?

Arjun (AJ) Singh:

People who were doing the processing of checks manually just saw that number drop because people were expecting to work in a different way. “How do I pay online? How do I manage my customer? How do I work the way my customers want to work?” So, Amanda, the point here is… This is maybe about three or four months old now, is that 20% of payments are actually made after 5:00 PM in these last couple of years. Are you seeing that too in your customer base? Are people still paying for the most part during business hours?

Amanda Lee:

Look, I think the percentage of people paying after 5:00 PM is increasing dramatically. I think that’s also due to staffing issues. Now with the pandemic, a lot of businesses have less staff or they’re operating on skeleton teams. I have a lot of… When I say a lot, I have business owners and people contacting me… well, used to, contacting me after hours a lot to make payments by credit card or whatever the case may be.

Amanda Lee:

The beautiful thing about platforms like ezyCollect is your customer can actually make that payment after hours without needing to contact you to confirm the balance or to get a copy of an invoice they’re missing. That’s a very valuable thing for your team, and it’s even more valuable for your customer because they’ve got all the information they need at their fingertips whenever they want to make the payment, and this is the gold nugget, right?

Amanda Lee:

You never want to stop a customer from paying you no matter what time of the day they want to make that payment because if they don’t pay you when they sit down at their desk at 10:00 at night to do their payments, if yours is all too hard, it just gets pushed to the side, and they pay their other bills. So that’s the psychology part of collections. Make it easy for your customer to pay you when they want to.

Arjun (AJ) Singh:

Yeah. I mean, look, so what we’re showing you here is a portal that you can spin up through ezyCollect for your customers to view your invoices because ezyCollect always got a live sync with your accounting or ERP system. So all that means is that your customers can come in at 6:00 at night. Instead of calling Amanda, “Amanda, can you please process this payment?” whether it’d be a credit card payment or something else, they can do it themselves at a time that suits them. Then, from a back office point of view, from your point of view, when they do make their payment, it automatically allocates the payment too into your ERP.

Arjun (AJ) Singh:

So we talked about the order-to-cash process. You want to unlock the points of friction on both ends for you as well because if you get credit card payments, the last thing you want is to come into work and see a bank statement with a thousand payments and you don’t know which customer it belongs to. If you get a report that says, “Hey, here are the payments. Here are the customers they belong to, and guess what? We’ve also applied the payments for you,” it makes your banking process much, much simpler. Right?

Arjun (AJ) Singh:

So I think that’s one, right? You need to start thinking in today’s day to unlock that cashflow process. If you don’t do this today, you need to do this today. Let your customer decide how they want to pay you. You might say, “Oh, my customers…” Actually, I’d love to hear from everyone on the call, but a lot of our customers say, “Our customer just pay by EDI or they do a bank transfer. I don’t need to accept credit cards. It’s too expensive.” Right? So talk about this in bit of detail. What does it mean it’s too expensive? Right? Because I mean, yes, we know there are credit card fees. Everyone has to live with them, but how do you go with that barrier, Amanda, when people say it’s too expensive to accept credit cards?

Amanda Lee:

Yeah. Look, I’m fairly straight about this. If you’re not accepting credit card payments, it actually would blow my mind that a company wouldn’t accept credit card payments. If I came along, you would definitely be accepting credit card payments. The other thing is credit card payment these days are becoming the way that we operate. I mean, when was the last time you had cash in your wallet? Even think about yourself and your own shopping behaviors. I never have cash in my wallet. I use my cards all the time.

Amanda Lee:

The other side of that coin is people, like my partner, he’s mad about the points that you get on your credit card. Right? He’ll even change his credit card, and I also want to talk about Amex. You must accept Amex because Amex actually have a fantastic rewards program, which is why a lot of people like to use Amex. If you have an Amex, you know that you’ve got to pay a fee every time you use it. Right? Amex people know they’ve got to pay a fee, and they don’t care because the rewards they’re getting at the other end are much greater. So a platform like ezyCollect means that you can accept any credit card payments you want, and the fee is automatically passed onto the customer.

Amanda Lee:

Now, customers are getting used to paying credit card fees now. They never used to. They wanted you to absorb it, but now they’re getting used to it because supermarkets charge them now if they want to use credit card and other larger organizations. So as soon as companies like that start doing it and they’re educating the client base for you, basically, because everyone is buying groceries, then you can slowly start instituting it as well. Now, a lot of my clients will absorb the cost for Visa and MasterCard, but they will charge the fee for the Amex. So it’s up to you.

Arjun (AJ) Singh:

Yeah. Again, coming back to the back office and the admin of it, we take care of that, right? You don’t have to manually work out how much you want to surcharge, how much you want to absorb, which cards. You just set up a rule, and then ezyCollect, when it presents the option to the customer, you can choose to surcharge the merchant fees. In this case, the end customer pays it, and you get the full amount, or if you want to absorb Visa and MasterCard, it will show there’s no merchant fees for that particular transaction because it’s been absorbed by the supplier. Right? From a back office point of view, you get less money, and there’s a bit of an adjustment that has to be made to close off the invoice, but it’s managed through the system. You don’t have to do it manually [crosstalk 00:47:00].

Amanda Lee:

Yeah, and to be honest with you, AJ, I’ve been encouraging my clients to use automation for so long now that sometimes I’ve almost forgotten how many steps used to be involved in all of this. Right? So that’s why automation is so important. Basically, 50% to 70% of tasks are taken care of, but it doesn’t eliminate any kind of person’s process or job because the thing is it gives them more time to spend on the customer in more valuable areas.

Arjun (AJ) Singh:

Yeah, yeah. So, look, I mean, we talked a lot about credit card because we know that’s a common source, but your customers can come and pay by bank transfer as well, or they can pay by instalments. They can view the portal as a place where they can see previous statements that have been issued as well. So it’s not just about a payments place. It’s a portal where a customer can come and leave. If you want, if you have an e-commerce website, you can even put this onto your old website. So you can embed that into your ordering systems as well, but really, the point of this slide was that you want to reduce the friction to unlock your order-to-cash process. Right? If you’re not accepting credit card payments, as Amanda said, please, please do. If you’re not, please tell us in the chat why not so we can understand the reason. Then, we can bring it up in the Q&A session that’s going to come up in just the next couple of minutes. So, look. Go ahead, Amanda.

Amanda Lee:

I was just going to say a pro tip right there is if you’ve got salespeople on the road, depending on what industry you’re in, that might be the case. Every single one of those salespeople should have a little EFTPOS machine in their car to accept payments. It’s a great idea.

Arjun (AJ) Singh:

Can I take it a step further? You don’t even need a physical EFTPOS machine.

Arjun (AJ) Singh:

The portal is like an app on your phone. So you can actually have it as a web app on your phone and take it from your phone.

Arjun (AJ) Singh:

So you don’t need a physical machine anymore. We have some of our clients doing that. They use the phone and just bring it up. It’s all PCI-compliant, so you don’t have to worry about all that stuff.

The 10 Gifts of Accelerated Cash Flow

Arjun (AJ) Singh:

So, look. What are the benefits of what we’ve shown you today? For example, data, using data to onboard your clients, using risk will help with your customer perception, give you greater business intelligence, and it just helps you have fewer errors and get more visibility. Human connections, right? It’s trust, loyalty with your customers, isn’t it? That is a direct benefit off of that.

Amanda Lee:

Yeah. AJ, what I’d like to say about this slide is having… I love the words “cashflow,” “confidence,” and “information” because your cash flow is vital. Having confidence in your business, in your processes, in your data, and what you’re doing, so your decision-making. You’ve got confidence in your decision-making. I mean, that’s vital. If there’s any part of these 10 gifts here on this slide where you’re still guessing or you’re still going, “Oh, you know what, I think this customer is pretty good. We’ll give them a $20,000 credit limit,” if it still rolls a little bit like that for your department, just stop. Just stop, and institute programs like ezyCollect that do all of that for you and it’s no longer a guessing game. It’s literally making decisions with confidence, proper business decisions.

Amanda Lee:

Moving forward, this kind of information, as it says here, reduces errors, saves so much time, and the important thing is real-time accuracy. So a customer rings you, asking what they owe or asks about a particular invoice they just got, being able to tell the customer immediately an accurate answer and not saying, “Oh, well, we actually haven’t updated the payments for three days. We’re not sure. I’ll just need to go check that or find your payment,” nonsense. So having that real-time information makes you look professional. You know what you’re doing, and that’s the truth. If you haven’t got real-time information, you’re just not operating at an optimum level.

Arjun (AJ) Singh:

True. Even for the bank debit in the payment screen previously. Your clients can pay you by bank transfer the way they do normally. But if it pays for the portal, guess what? It would reconcile that as well into your bank.

Arjun (AJ) Singh:

Yes, it might be a little bit extra cost, like 10, 15 cents, or 30 cents for a bank transfer, but the time saved and the error reduction on the reconciliation is massive. Right? So things to think about anyway. 

Q&A 

Arjun (AJ) Singh:

So, look. Just before we get to the Q&A, Amanda has been doing this for 30 years. She’s been kind enough to offer some time to any of the folks on the webinar. If you’re interested to get in touch with ezyCollect, and we’ll book a time with Amanda for you so you can have a chat with her and understand how you can look at your own system. If you already use ezyCollect, she can look at your ezyCollect. If you don’t, then she can have a chat to you just about your processes offline, but it’s just something that we want to offer to everyone here. So we have a few questions, but Amanda, is there anything that you want to add to that at all?

Amanda Lee:

I’d just like to say you can use the 15 minutes with me to even discuss a particular data you might be having problems with. You can use that 15 minutes to talk about the process you currently have and what tips I might have for you to make that better, or faster, or more successful. You can use that time with me to ask me whatever you want. I’m fairly generous with my time, and I really do want to contribute to all of you. So if there’s anything you want to chat to me about, please give me a call. I would love to speak to you.

  • What is DSO?

Arjun (AJ) Singh:

True. All right. So we’ve got a couple of questions and comments here. Let’s just go through. There’s actually quite a few. We have six, seven minutes, so we’ll get through what we can in the next seven minutes. So just some clarifications. DSO is Day Sales Outstanding, and really, what the metric is, if you’re turning over about $10 million a year, right, and you can reduce your Day Sales Outstanding by 10 days, say, from 60 days to 50 days, it unlocks about a million dollars in working capital.

Arjun (AJ) Singh:

Someone wants to clarify what we meant by that. The actual workings behind that, we can share with you. So again, just reach out to us at ezyCollect, and we can share with you and actually a really, really nice ROI calculator that shows how does a reduction DSO help work in capital, and it’s not just… That’s one lever, right? You can improve things like your payables, your inventory. All those things help, but we can share that calculator with you. So if you want that, it’s a really nice resource, and I can share that with you. It was built by one of our partners at Quantum Accounting Partners. So they can definitely share that with you as well.

  • “Can we touch base on the customer vetting process for my business where we’re tendering for work, where our sales team are trying to win work for these businesses? “

Arjun (AJ) Singh:

The other question we had here is something back for ezyCollect. So we can take note of that. That’s just something about the ezyCollect system specifically, so we’ll take it on board. So we’ll just note that. Let’s have a quick look here at some of the questions here. “Can we touch base on the customer vetting process for my business where we’re tendering for work, where our sales team are trying to win work for these businesses? What should I be doing with these checks? Should I be turning them away after these checks?” So that’s a good question is when you’re vetting a customer, before they’re even a customer, how do you manage the risk process? Right?

Arjun (AJ) Singh:

So one comment there I would add, and Amanda, you can add your thoughts in a second, is you can certainly if you want send them an application form, but that’s probably a bit overkill. Before they’re actually a customer, you don’t want to send them an application form that to fill in. But what you can also do is come into the scores and reports, and get a score in any business by just typing in their business name or their ABN, and you can then get a score on that business almost like real-time. So what that does? It gives you at least some external data of how good or bad that customer is. You can go and look at their credit report if you want to see if there any PPSR claims. Are there any other registered securities against them? Is there any director defaults, any bad debt risks? I mean, is that what you would do, Amanda, if you wanted to vet something for a tender process or before they’re actually a customer?

Amanda Lee:

100% because I always advocate actually choosing who your customers are, not just taking on board anyone because they decide they want to do the business with you. I couldn’t add anymore to that, AJ. That was perfect. Those are the things they need to be doing.

  • What is a credit score?

Arjun (AJ) Singh:

Yeah. Okay. Perfect. Someone asked just to be really clear what is a credit score to me just because maybe it’s something that we use a lot in our jargon. A credit score or a risk score is just a score that’s normalized to say for all the businesses in the country like New Zealand or across the world, where does it sit in terms of risk based on many sources of different data points?

Arjun (AJ) Singh:

So the way a score is built by these third-party agencies is they look at how are businesses paying their utilities, how they’re paying their phone bills, how they’re paying other businesses, how they’re paying different suppliers. They look at the age trial balance, and then they use a few other demographic factors and industry factors to say, “Based on this, this business is an average, or a high, or a low-risk of late payment or failure.” Right? So, go ahead, Amanda.

Amanda Lee:

AJ, I’d just like to add there. Some people may not be aware that the whole credit system in Australia has changed where once upon a time, if someone did a credit check on you, it just showed whether you had a default or other things against your name. It wasn’t based on… Like if you paid your Telstra bill late every month, nobody would know about it. Right? Unless you actually had a default, but what’s changed now is it’s gone from a credit rating, and now we have what they call a credit score like America. We’re similar to America now.

Amanda Lee:

So what a credit score does is now that so much is online, all these large companies are actually gauging how soon you pay accounts and if you pay them by the due date. If you don’t, it starts affecting your credit scores. So people’s credit scores are high if they’re good payers and pay their bills on time. But if you’re a business that’s constantly paying your creditors late, that can actually impact your credit score. So the thing is too that if you’re not managing your receivables and getting your money in the door, which means you’re paying customers late, it does have numerous impacts on you too. So all these things matter. So that’s what credit scores are. They’re a balance of how people are financially operating their business.

  • What are your tips to improve collections?

Arjun (AJ) Singh:

There was actually another question that’s really good in the last minute that we have is, “Give us your couple of tips.” Right? This is for you, I guess, Amanda. For those stubborn payers who are always outside terms regardless of follow-ups, regardless of calls, what are the one or two tips you can do because this is your wheelhouse, Amanda? What do you do?

Amanda Lee:

Yeah. This is my favourite, right? So you’re probably not going to want to hear my answer completely because, at the end of the day, it’s what you’ve allowed that customer to do. So that’s called customer behaviour, and it’s the relationship that you’ve created with them. So what’s happened is the customer is actually in the position of power, not you. They’re in control of the relationship, not you. So this comes back to boundaries, respect, and the processes you’ve got in place with customers like that. So this is how you approach it.

Amanda Lee:

So if I go into a business and they’re riddled with customers like that, right? Everyone pays them at 60 days from the end of the month or 90 days from the end of the month, and that’s why they’re struggling. So you phone that customer, and you accept responsibility for the fact that you’ve actually operated a sloppy process to some degree because how did they ever get out there in the first place? Then, secondly, right, you reiterate to them that these are the new changes that you’ve bought in, but you understand they’re overdue. You don’t expect them to pay it all at once, but you’ve actually rang to have a communication with them of how can you work with them to actually pull that account in within 60 days, or within 30 days, or whatever you think is a reasonable period of time, depending on the size of the debt and how often they normally trade overdue.

Amanda Lee:

So when you do that, you have to remember if you’re wanting them to make extra payments to get up to date, plus keep paying their current account for whatever purchases they’re making because you want to keep selling to them, right? So you’ve got to do a deal with them, and that’s where the negotiation and the connection with them is really important. You need to establish a whole new relationship with them. That starts with you taking control, you being in power of the relationship, and making sure that you always manage that relationship according to your rules and your business, not according to the customer’s rules and the customer’s way of doing things. Right? But it’s a synergy. You have to find the balance with that customer. I hope that helps you. Feel free to call me for a consult about that customer if you want to.

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