Transforming your accounts receivable process for a post-pandemic future

Transforming your accounts receivable process for a post-pandemic future

How we do business has changed. Physical distance from co-workers and customers has transformed how we communicate and connect. Supply chains once buoyed by cash flowing through them are hurting. Your accounts receivable process, which counts on both communication and cash flow, has probably been tested in a COVID-19 world.

The question is, did it pass? And how will you transform your accounts receivable (AR) process for now and a post-pandemic future?

Here are some of the pivot points every accounts receivable manager needs to know and the next steps to take in the current B2B environment.

Key points

  • Eliminate the mess and confusion with centralised accounts receivable data and task management.
  • Lower the time and financial costs of your accounts receivable process and invest in better customer care.
  • Listen to your customers and offer solutions to their cash flow constraints.
  • Actively protect your business from bad debt risks and lower your credit risk exposure.

     

1. Neither you or your customers want higher costs right now

 

What accounts receivable managers need to know:

Your high costs of accounts receivable management can be directly attributed to the cost of doing labour-intensive manual tasks. Accounts receivable tasks such as sending email reminders, preparing monthly statements and sifting through spreadsheets are eating up time your staff could be investing in other revenue-generating activities. Unsuccessful collection attempts due to a leaky process have a zero return on investment.

That’s just your story. What about your customers? They don’t want to be wasting their labour on dealing with your complicated order-to-payment process. They’ll simply move on to the supplier that’s easy to deal with.

 

Next steps to consider:

 

Automated accounts receivable solutions like ezyCollect do the groundwork for you: identifying when invoices become overdue, funneling invoices into a reminder schedule, taking care of your monthly statement run, accepting payments online and even thanking your customers for payment. 

With the routine tasks running in the background, your team has more time to further reduce accounts receivable costs. Spend more time analysing your books for the debts at risk of being written-off; pick up the phone and save those unrealised sales before they slip into the land of the lost.

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2. Your office loss slows down an already time-consuming process

What accounts receivable managers need to know:

 

An accounts team working remotely is separated from each other and their usual work practices. It is now harder to share tasks and get visibility on day-by-day accounts receivable task management. Who is making the collection calls today? What did the customer promise to pay? How will you accept customer payments over the phone when you’re not in the office? 

Next steps to consider:

Just as your sales team is using your ERP or CRM solution to track the sales funnel, your accounts receivable team can keep close tabs on the payments funnel with a cloud-based debtor CRM.

To avoid the mess of spreadsheets and silos of information, your team can work from anywhere and check in with one shared accounts receivable data source. It eliminates confusion as it is the single source of truth for all overdues, customer communications, promises to pay, payment history, and tasks that are due.

3. Your customers are impacted and you need to respond

 

What accounts receivable managers need to know:

 

Of course you should be concerned with your own cash flow. But now is the time to also express empathy and be your collaborative best with the rest of your supply chain. ‘We’re all in this together’, right? As your customers come under financial pressure, will you keep communicating as if nothing has happened, or will you shift your message and tone to directly address their current cash flow crisis? Will you be the thorn in their side demanding payment or the guide who helps them to continue to trade with you?

Next steps to consider:

 

Businesses that emerge from COVID-19 with their customers intact will recover faster. You may now need to consider accepting part payments, offering buy now pay later, or accepting credit card payments as your customers look for responsible ways to extend their line of credit. If your customers want to continue to trade with you but need more options, how can your accounts service adapt to support your customer service?

 

4. Will new customers be more trouble than they’re worth?

What accounts receivable managers need to know:

 

A new customer who never pays you is literally more trouble than they’re worth. While it’s tempting to get more customers onto your books, if their cash doesn’t follow, it’s a useless exercise. Trade references have their place but they are time consuming and often biased. Your prospective customers arrive with an audit trail of past credit events and current credit activity.

Do you have eyes on every customer’s credit behaviour?

Next steps to consider:

 

Add a step in your customer onboarding process to thoroughly assess a prospective customer’s credit rating before you issue a cent of credit. For minimal effort and as little as $5, you can get a basic credit report from ezyCollect’s Credit Insights service.

With your credit risk assessments done, adjust your payment terms to minimise your credit risk exposure. Some customers should be on cash on delivery terms. For good payers, you could consider extending more credit to foster more business.

You can even go deeper with day-by-day analysis of how promptly your customers are paying you and others. For example, ezyCollect’s automated credit insights service will track every customer’s payment time and send you risk management considerations.

5. Buyers spend differently now

 

What accounts receivable managers need to know:

 

Supply and demand has changed. The multi-billion dollar uptake in the JobKeeper and cash flow boost payments from the Australian Government proves that business revenue has taken a sizeable hit. However, not everyone is in the negative. Some of your customers will be innovating, even thriving. How is your team quickly adapting to the fluctuating volume of invoices and payment reminders per customer? Can you track who has got money to spend and are you actively nurturing them for more business?

Next steps to consider:

 

Solidify valuable relationships by talking to customers and asking them how they are adapting their business now and for the future. Ask them what would make their payables experience with you better, then tell them how you intend to break down the barriers to paying you. Solving your busy customers’ problems makes you a valued supplier. Your permanent improvements will keep customers returning to do business with you.

6. Buyers pay differently now

 

What accounts receivable managers need to know:

In the April-June 2020 business quarter, the economic impact of the COVID-19 pandemic began to emerge. At ezyCollect we saw an interesting pattern in payment behaviour: an uptake in credit card payments and an increase in after-hours online payments. One in five payments were closed after normal business hours.

Do your payment methods support your customers to pay when and how they can? 

Next steps to consider:

 

To never miss a payment, you have to think digital. Every aspect of how we communicate, connect and transact each day has moved online. Have your payment methods followed? Have you adapted your payment methods to give your customers cashless convenience, access to credit, and the flexibility to pay you even if your business is closed for the day?

Get a free online payment portal for your customers

In summary

 

Working conditions and the market have changed rapidly. The Coronavirus pandemic isn’t over and even when it is, its legacy will remain. Both you and your customers are already adapting to a forced new reality.  It may not be easy or even desirable to go back to the way things were.

In fact, accounts receivable managers who fought the tidal wave of uncertainty with robust cash recovery processes, careful and consistent communications with customers and insightful risk management will not want to go backwards. It’s onwards and upwards from here.

For more ideas on how to transform your accounts receivable process, ezyCollect offers no-obligation daily product tours.

How top food industry CFOs save time and money on accounts receivable management

How top food industry CFOs save time and money on accounts receivable management

The food processing industry is Australia’s largest manufacturer (austrade.gov.au). From paddock to port, the food industry contributes billions of dollars in employment and revenue. What’s more, the world-class reputation of the Australian food industry has seen both domestic and export markets grow at a healthy rate over the last decade.

Right now, the food industry is weathering many storms: climate change, fast-moving consumer trends, rising costs of raw materials and labour…the list goes on. Now more than ever, food industry chief financial officers (CFOs) must mitigate surging costs, cashflow risks and business inefficiencies. The bottom line depends on it. And top CFOs know it.

The challenge to stay afloat persists: the food industry routinely registers in the top three industries for insolvency each year in Australia (ASIC Annual Insolvency Statistics).


The not-so hidden costs in accounts receivable management

Accounts receivable has an impact on cashflow, but that’s not all. Financial controllers in the food and beverage industry routinely lament a productivity cost, with hours of staff time lost to chasing unpaid invoices every day. The injustice irks them, too. After all, the sales team earned the sale, the buyer received their goods — they’ve even had time to sell them — and yet, the bank account is bare.

The costs of accounts receivable management are often hiding in plain sight. Here are the major ones:

  • Labour: Midsized businesses often have a small team of credit controllers chasing unpaid invoices every month. At ezyCollect, we meet a lot of larger businesses that have been losing up to 40 hours a week as busy staff spend time trying to collect overdue invoices.

  • Customer churn: Buyer-supplier relationships can disintegrate because of invoice disputes and late payments if they’re not handled with care.

  • Bad debt: As invoices age, they become harder to recover. Stubborn debts can end up as bad debt write-offs. Retailers, typically the buyer for the food and beverage industry, are consistently in the top two slowest paying industries (illion, September 2019 Late Payments Analysis.)

  • Lost working capital: Food and beverage companies that commence using ezyCollect’s technology for accounts receivable management start with tens of thousands of dollars owing. Creeping overdue debt can quickly cripple an otherwise thriving business.

  • Loans: Short-term loans and debt and invoice financing options help cover cashflow shortfalls but not without facility fees.

  • Personal hardship: Many companies in the food and beverage industry are family-run businesses. The Australian Small Business and Family Enterprise Ombudsman found that late payments have significant negative ramifications on mental health (Review of Payment Terms, Times and Practices, March 2019).

Tech solutions can alleviate the pain

Traditionally, accounts receivable management has been a labour-intensive task, with financial controllers adding headcount as the go-to solution to chase overdue customers.

However, the top CFO is thinking differently. Cloud accounting software has changed how accounts teams work. Financial controllers now deeply understand how technology can streamline cash management functions by taking care of the daily grind.

Here’s what top CFOs in the food industry do to curb the costs of accounts receivable:

Follow a credit risk management plan

Protect the business from the cashflow risk of late paying customers by running a credit check before issuing credit to new and existing customers. Fail to do a credit check with a reputable bureau and you run the risk of being blindsided by a customer who never pays or constantly pays late.

Depending on the business credit check you order*, you’ll get your customer’s risk rating for late payment and even business failure. (Contact us to trial our soon-to-be released credit risk service with ezyCollect.)

CFOs then offer cash on delivery only, or shorten payment terms for medium-to-high risk payers and monitor their payment behaviour.

An ongoing credit risk monitoring service rounds out the protection and is a good investment in long-term piece of mind. You’ll receive email or sms alerts to any significant credit activity your customers register in the market. This way, you’re the first to know — not the last to know — when your customer is at risk of defaulting.

*Users of ezyCollect can order a business credit check report from within the application.

Maintain an up-to-date debtor database

The debtor database can easily become out-of-date if you lose track of your debtor’s contact details. Top CFOs know that the debtor database is the foundation of essential follow-up payment reminders. How does your credit controller communicate with overdue customers if he or she can’t contact them?

In addition to contact details, credit controllers need to know what communications the debtor has received, opened and responded to. They want to know how much is owing and how overdue it is. They want know what the next course of action is, based on previous activity. Financial controllers understand that their teams need one central source of truth to track invoices to payment. Without it, they’re flying blind, and that’s a waste of time and resources.

Convert invoices into cashiers

In the digital era, invoices should no longer be just another passive document that arrives in the post or inbox. Your invoice is the primary calling card for payment and should actively collect money for you.

Top CFOs in the food industry understand the time-poor nature of their buyers, so they make sure the invoice is fully optimised to create a seamless payments experience for the customer.

  1. Systematically prepare and send invoices without delay.
  2. Clearly state payment terms and due date at the top of the invoice.
  3. Add a Pay Now button to digital invoices so customers click to enter their payment portal and pay.
  4. List all the payment methods you accept on your invoice.
  5. Issue invoices without errors or omissions.

Automate routine reminders

Human labour in the food industry is a major cost to running a business…so why waste it on routine tasks? Especially when many tasks in accounts receivable are ideal for automation, simply because they follow a set of rules. For example, send a reminder if an invoice is overdue by one day, send a second email after seven days, make a collection call on Day 13. While an employee can certainly follow these rules, consistently completing the tasks becomes impossible as the business grows. On the other hand, automation software is designed to do these routine tasks in bulk.

Best of all? Your staff are no longer locked down with tedious tasks and have more time for processing credit applications or making necessary collection calls.

Collect money online

Using an online payment systems means that your staff won’t need to spend time manually accepting payments over the phone or banking cheques. That’s because your customers will self-serve to complete their payments through the online checkout you provide.

What’s more, an online customer payment portal also serves as a depository for all of your customer’s open invoices. Food industry buyers typically replenish their stock regularly and carry many open invoices from the same supplier. With one place to view, click and pay, your buyers have the convenience of paying multiple invoices at once. And you can collect bulk payments easily. ezyCollect’s online payments solution instantly upgrades your payment options – check it out!

Offer buy now pay later

In the B2C space, buy now pay later is almost an essential, says Power Retail in its retail industry report BNPL 2019: More Shoppers, More Players and More Options. Buy now pay later has been found to stimulate sales, give consumers more choice and increase the average order value.

It follows that suppliers in the B2B space can reap those rewards, too. Certainly at ezyCollect, we’ve seen an increasing uptake in suppliers who offer our buy now pay later option to their debtors. What debtors love is the opportunity to repay a finance provider over time, while maintaining an on-time payment relationship with their supplier.

Outsource stubborn debts to a debt collection agency

In the words of Kenny Rogers, top CFOs ‘know when to hold ’em, know when to fold ’em, know when to walk away, and know when to run.’

Referring your stubborn debts to the professional debt collectors allows the trained professionals to take over your collection efforts. Debt collectors who are trained in positive collection techniques not only have a better recovery rate than your untrained staff, they also relieve them of chasing activity that isn’t generating results.

Ditch the paper trail

One CFO in the health food industry told us: “We were printing off ledgers and by the time we got to making follow-up calls, we needed to reprint them.”

Instead of a paper trail that quickly becomes outdated, rely on a digital database that updates as often as you need it and allows you to track invoices and keep a comprehensive audit trail of debtor management activities. Ditch the paper trail and also the frustration and wasted time.

Key points:

  • The CFO in the food and beverage industry has a key strategic role to steer the business towards profitability and away from cashflow risks.
  • Purpose-built technology supports staff productivity and collection success.
  • Digital solutions such as automated reminders and online payments save labour costs.
  • Customers seek a better payments experience and diverse payment options.

Thinking about streamlining your collections process to cut accounts receivable costs? Book in for a 1:1 product tour with an ezyCollect specialist today.

How accounts receivable automation improves productivity and cashflow

How accounts receivable automation improves productivity and cashflow

Accounts receivable automation software promises a disciplined workflow plus time-saving tools for peak labour productivity. Essentially, a best practice process powered by an automation engine.

And there’s a good reason why accounts receivable is often targeted by Boards as a key driver of cashflow. After all, it’s revenue just waiting to hit the bank account. The problem is the waiting part. Despite Inquiries, regulations and voluntary codes of practice, business-to-business late payments persist. But when your Board demands faster cash recovery, it’s time to take control.

But how do accounts receivable departments reverse a trend in late payments when they’re not prepped for success?

Growing businesses need efficient processes

Midsized companies are ideal candidates for a technology-enabled solution. Often stuck in small business mode, their staff  battle on with a manual debtor management ‘system’ that comprises a mess of spreadsheets, outdated data and limited resources. It all leads to a haphazard collection process resulting in lost time and cash.

Without the right tools for the job, even the most proficient staff can run out of steam for what seems like an endless task of chasing payments. As one ezyCollect user told us recently: “It felt like I was always flying blind.”

It seems that credit controllers can be working very hard, yet the cash remains locked in the land of the lost.

See ezyCollect in action. Book a demo

Accounts receivable duties are ideal for automation

The fact is, workplace productivity improves with automation technology. Accounts receivable tasks are perfectly suited to automation because they fit the following automation criteria:

  • The task is rule-based.
    For example, if an invoice payment is 2 days overdue, then send a reminder.
  • Actions follow a consistent workflow.
    For example, send payment reminders at 2 days overdue, 10 days overdue, then call the debtor, then send a demand letter by Day 30.
  • Generates a high volume of output.
    For example, issuing hundreds of invoices then sending multiple reminders per invoice results in a high volume of communications.  
  • Can be customised from templates.
    For example, use the same format for reminder messages and customise them per customer account.

Even better, when you automate the repetitive manual tasks (like sending payment reminder emails), you free up valuable staff time for the high-touch accounts receivable duties that benefit most from human skills of listening, empathy and negotiation. That’s more time for phone calls to debtors, dispute resolution and customer service.

Automation technology speeds up collection times

Your days sales outstanding or DSO is the average number of days it takes for your business to get paid i.e. your average collection time.

Your DSO can drastically improve if you move through the invoice-to-collection process from beginning to end, efficiently:

  • Issue correct invoices quickly (the beginning)
  • Communicate promptly and consistently as payments become overdue (the messy middle)
  • Make it fast and frictionless for debtors to pay you (the end)

Automation offers solutions across the accounts receivable spectrum. You can automate:

  • the issue of new invoices created in your accounting software
  • a pre-reminder (‘Hi, your invoice is due for payment soon’)
  • a series of payment reminders by email and SMS
  • and even a self-serve checkout for debtors to settle their accounts online

The end-to-end nature of automation can greatly reduce your reliance on someone’s hands-on time, which is notoriously interrupted, particularly during busy seasonal trade. An automation engine will move through the process for you, 24/7, all the while condensing the time between invoicing and collecting. And that’s how cash recovery becomes faster and working capital predictably improves.


Reducing the cost of accounts receivable

While your business may eventually collect payment, it accumulates costs each day that accounts receivable age. You’ve collected the cash, but at what cost?

Here are some costs associated with an inefficient accounts receivable system:

  • Human labour on routine tasks. Not only are you paying for staff  time, you could be wasting their time and talents on tasks that don’t fully utilise their skills. Midsized businesses that use ezyCollect, for example, report a saving of up to 8 hours per day on routine accounts receivable duties.

  • Fees on short terms loans or invoice financing options. Accessing money from  lenders is an option when cashflow is tight but it’s never without a cost.

  • Errors and omissions. When tasks are reliant on a hands-on approach, they are susceptible to inaccuracies, variations in people’s productivity throughout the day, and divergence from agreed standards. Any requirement to re-do steps in the collections process prolongs your collection time.

  • Delinquent debts. As invoices age, they become increasingly difficult to collect. Once an invoice is more than 12 months old, illion suggests there is a 90 percent chance you will need to write-it off as a bad debt. That’s the value of the sale wiped from your books, plus the expense incurred trying to collect the debt.

Automation helps to overcome debtor excuses

Dealing with debtor excuses is par for the course; just ask any credit controller. Here are three common reasons for late payments and how automation can overcome them:

#1 I never received your invoice

The automation solution: Set a rule to issue invoices. For example, ezyCollect can automatically issue new invoices to your debtors once they are created in your accounting system. Then automatically attach invoice copies to every automated reminder so your debtor always has a copy of the invoice.

# 2 I forgot to pay – you should have reminded me

The automation solution: Set up a communication workflow that automates a series of payment reminders that reach debtors via email and SMS. Customise reminder templates so your debtor understands it’s you communicating with them, not a third party they have no relationship with. Include a phone call as part of escalating actions in your automation workflow.

#3 I’m out of the office / Your office is closed

The automation solution: Add a ‘Pay Now’ prompt to your invoices and reminders so debtors can click and pay online, from any device, anywhere. Payments come in 24/7, regardless of who’s in the office. Depending on your software, payments can even be auto-reconciled for you.

Your accounts receivable before and after automation

So how does the accounts receivable process change with an automation system working in the background?

This table describes a few changes you can expect:

Current With ezyCollect’s automation
Staff look at a number of sources to report on the current status of ageing receivables. Aged receivables are mapped for you, showing a distribution of ageing invoices. Dashboard analytics provide real-time data of  key metrics such as value of invoices due and overdue.
Late payments persist due to poor visibility of ageing invoices. Dashboard reporting puts a spotlight on largest overdue debtors, longest overdue debtors and debtors entering the danger zone of defaulting. Filters let you drill down into debtor sets and find ageing debtors immediately.
AR staff print off an aged receivables report which quickly becomes outdated.  Each debtor’s account history is maintained in real-time in one central hub and includes all reminder communications and debtor notes.
AR staff communicates with debtors only after an invoice becomes overdue. Automate a friendly reminder that payment is due soon, prompting debtors to pay early or on time.
Call all debtors from a long list of overdue debtors regardless of previous communications. Each morning the system emails you a list of debtors who have reached the stage of needing a reminder phone call.
Manually type reminder emails to large-value debtors; there’s no time to send reminders to everyone. Use merge fields to customise reminder templates with debtor information. Then allocate all or some debtors to an automated workflow that methodically delivers email and SMS reminders on schedule.
Chasing lapses after a few reminder attempts. Chasing escalates with one-click action to send a demand letter or outsource to a debt collector.
AR person remains at desk to process credit card payments over the phone. Debtors complete credit card payments via clickable Pay Now buttons on invoices and reminders, at any time, day or night.
Payments are received but not acknowledged. Thank you email is automatically generated when a debtor pays and reinforces positive payment behaviour.
Hire more staff or outsource to a bookkeeper to handle a growing list of debtors. Automation is highly scalable and can handle your growing list of debtors.

Key points:

  • Productivity and cashflow improve with accounts receivable automation software.
  • Achieve cost savings as human productivity improves and human errors decline.
  • Buyer relationships strengthen as your customer service and customer payables experience improves.
  • No industry is immune from technological transformation. But the ones that get ahead of the curve will reap the benefits of competitive advantage.

To see how ezyCollect’s automated workflow can improve your accounts receivable process and cashflow, request a demo today:


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