As reported by the International Monetary Fund, the United States is now in the worst economic downturn since the Great Depression. Unemployment, retail sales, economic output and industrial production are all at record numbers. In this time, it is critical for organizations to recognize the severity of the current situation, and to realize it is not just business as usual. Every business must change how they operate now, in order to survive the current economic downturn.
Staying on Top of Your Receivables
Change can be difficult, and oftentimes organizations struggle knowing where to start. But a good first step any business can take to ensure business continuity is staying on top of receivables. To do this as effectively and as efficiently as possible, here are five tips we’ve gathered from clients as they share what they are doing today to adapt to the ever changing environment.
01. Avoid Clamping Down Harshly On Your AR
When faced with a crisis, a common first reaction from finance leaders is to lock things down, and to try and collect on all outstanding invoices. But being too aggressive with your customers could drive them away and lose business for your company in the future. The key is consistency; be considerate of the current situation, but also be realistic about your finances too. Communicate to your customers what your expectations are going forward and make clear of any consequences should they not hold up their end of the bargain. Maintain an open line of communication and treat every deal as a partnership.
02. Employ the Carrot and Stick Approach
Successful AR managers are able to find the right balance between the carrot and stick approach and utilize both methods simultaneously to effectively stay on top of their receivables. Our clients recommend pairing positive reinforcements like discounts with negative reinforcements, such as late fees. Here, the goal isn’t to punish your customers, but instead to encourage them to pay in a timely fashion. As was the case with tip #1, your organization must be consistent in its approach. If you’re offering discounts to customers who pay within 10 days, that means 10 days. Ensure both sides have a clear understanding of your expectations, and if in doubt, over communicate until you’re satisfied.
03. Be Flexible
The global environment we find ourselves in today is unlike anything we’ve experienced before, there is no handbook for what we’re current dealing with. We’re all trying to figure things out as they happen. To that end, our clients recommend retaining some level of flexibility in your business processes, so you are better able to support those who are struggling to get by. So long as you are in the cash position to do so, delivering a flexible customer experience in these times can help strengthen your relationships in the long run.
04. Use Technology to Your Advantage
In order for your organization to effectively facilitate the first three tips, you must first ensure you have the right technology in place to do so. A good place to start is with an AR Automation solution that seamlessly integrates with your ERP and streamlines your collections process. The right solution will:
- Save you time by automatically completing many labor-intensive tasks
- Save you money by moving your current paper processes to a digital environment
- Reduce the likelihood of human error and costly mistakes
- Provide better insight into your current cash flow state
05. Have the Right Capabilities
When choosing your AR solution, look for a platform that provides the following functionality:
- Customer Information: Your solution should maintain a record of all customer information. Treat it as a CRM for AR!
- Automated Collections: Your solution should automatically handle all task-based activities, so your team only needs to worry about exception-cases.
- Customer Scorecards: Your solution should give insight into customer payment behaviour, so you can confidently determine which customers you can be flexible with.
- Ability for Customers to Communicate with You: An effective AR solution will allow for two-way conversation between you and your customers, so you know they’re always in the loop.
- The Ability for Customers to Pay You: Your AR solution should allow for several payment methods to make it as easy as possible for your customers to pay you.
- Integration into Your ERP: Your solution needs to integrate seamlessly with your ERP system.
- Customer Reporting: No matter how complex your organizational structure may be, your AR solution should be able to distill things down so you can track AR at all levels.
Incorporating such a solution into your current business process today will enable your organization to stay on top of its receivables and provide business continuity during these uncertain times.
If you’d like to learn more about how your business can transform today, please contact us directly and we’ll be happy to answer any questions you have.
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