Managing Accounts Receivable in Challenging Times: 7 Tips for an Effective Strategy

During times of significant disruption and uncertainty, it’s essential for organisations to maintain business process efficiency as well as communication with customers and team members, especially when it comes to accounts receivable (AR).

Today’s workforce is becoming increasingly remote, and supply chain disruptions have directly impacted businesses and their ability to manage their AR process and collect cash. Credit and collections managers need to work even harder to preserve cashflow and provide the same service level to customers. Luckily, we’ve got some actionable advice to help you manage AR effectively, even in challenging times.

We’ve compiled seven tips to help you adapt your collections strategy, continue collecting cash, take care of your customers and empower your team during times of disruption or change, and how accounts receivable automation software can help you do it all. 

1. Reassess your receivables situation

It’s vital to analyse your business and understand what cash can be realistically collected, what customers you can talk to, who is at risk, etc.

HOW TO DO IT

Start by reviewing your situation (e.g., customer categories, aging balance, at-risk cash, etc.) to make the most informed decisions and prioritise your efforts correctly. Continue to monitor daily performance evolution and cash forecasting (i.e., cash expected to come in and predictions), as it’s crucial to keep an eye on your daily activity, particularly in uncertain periods, and put effort and resources where they need to be. Lastly, adjust your collections category following analysis.

HOW ACCOUNTS RECEIVABLE SOFTWARE HELPS

The ability to report through customer categories (e.g., by industry, profile, payer rating, etc.), dashboards and KPIs help analyse your risk and orientate your collections efforts.

2. Adjust your collections strategy

In today’s climate, your collections strategy may need to be adjusted to continue to bring efficiency to your collections process.

HOW TO DO IT

Your priority needs to be on collecting all the cash that can be collected, and efforts should be focused on that objective. Suspend your usual activity and prioritise activities according to your business’s needs. Target the highest amounts to be collected, customers most at risk according to industry, payer ratings, or past-due (e.g., 90+ days on your aged balance). You may also need to adjust your methodology (e.g., send emails or make calls instead of mailing letters) or have your available staff focus on specific tasks. Search for efficiency more than ever!

HOW ACCOUNTS RECEIVABLE SOFTWARE HELPS

Adapt your collections process and change the threshold for triggering collection calls, refine call priority to focus on overdue promise-to-pay or follow-up calls, and customise to-do lists.

3. Move your customers to e-invoicing

Encouraging customers to move to e-invoicing is the most effective way to ensure successful invoice delivery.

HOW TO DO IT

With reduced postal services and invoices stuck in transit, now is the time to move your customers to e-invoicing. In addition to being able to send an e-invoice regardless of external factors, moving to e-invoicing lowers your admin costs, reduces invoice delivery time and provides your customers with more time to process, approve and potentially resolve any invoice-related issues with you. With real-time invoice delivery status, anticipate collections issues by (re) sending the original or a duplicate invoice by email to customers who usually receive their invoices by postal mail.

HOW ACCOUNTS RECEIVABLE SOFTWARE HELPS

Seamless transition to e-invoicing and delivery status tracking from dashboards or collections module reports.

4. Facilitate customer payments

By offering early payment discounts and flexible online payment solutions, you can help motivate customers to pay you earlier.

HOW TO DO IT

Offering your customers the ability to renegotiate payment terms and/or spread their debt with you over a longer time period helps create a relationship where customers are more likely to meet their payment obligations and, in turn, your business eventually secures revenue. Additionally, by providing early payment discounts to customers who are able to pay earlier, you maintain a healthy cash flow. By being customer-focused and easy to deal with, your customers will most likely want to do more business with you in the future.

HOW ACCOUNTS RECEIVABLE SOFTWARE HELPS

AutoPay plans give customers longer payment terms and you are more likely to receive payment at each installment due date — a win-win situation for both you and your customers.

5. Manage customer relationships

Staying in touch with your customers is important for finding out how they’re dealing with the current situation and how you can find solutions together.

HOW TO DO IT

Based on the staff you have in place and your level of activity, you can choose to talk to certain customers in priority (e.g., industries in difficulty, highest outstanding amounts, etc.), send bulk messages to quickly reach out to a large customer base, or give customers access to a portal to access invoices, payment plans, aged balance and messages in real-time.

HOW ACCOUNTS RECEIVABLE SOFTWARE HELPS

With access to message templates, bulk messaging capabilities and a customer portal, your collections team has more time to focus on more important tasks like talking to at-risk customers.

6. Make collaboration a priority

Collaboration and communication between your team and your customers is key for AR visibility and efficiency, especially with the shift to more remote work.

HOW TO DO IT

It’s crucial to continue collaborating with your team, share information and resolve issues, particularly around dispute or escalation calls (e.g., customers asking for installments, etc.). Teams working in silos from home with paper-based processes (e.g., Excel spreadsheets and ERP reports, printed invoices sent via postal mail, etc.) are struggling to focus on the activities that really matter — building customer relationships and getting paid faster.

HOW ACCOUNTS RECEIVABLE SOFTWARE HELPS

Create, assign and monitor tasks directly from the CRM-like solution and collaborate with your team and co-workers as if you were in the office. Keep stakeholders up-to-date and ensure management can oversee team performance and ensure the collections strategy is correctly adapted to the situation.

7. Take care of your team!

Even with working at home, it’s important to maintain a positive and engaging workplace for your team.

HOW TO DO IT

Taking care of your cash and customers must be a top priority, but taking care of your employees should not be overlooked. By empowering them and acknowledging their work, particularly in difficult times, you are strengthening morale, purpose and team spirit. Be creative! Motivate your team with fun challenges. Set up rewards according to the percentage of achievements. If goals are 100% achieved, compensate the team when everyone’s back in the office!

HOW ACCOUNTS RECEIVABLE SOFTWARE HELPS

Use internal forecast team goals to set up an amount to be collected weekly or monthly. Follow team activity and adjust workload as needed to help those who may be having difficulty.

Prepare your company for the future

When the situation gets back to “normal”, take the time to review and see what worked and what could be improved should you be faced with a similar situation in the future. To continue learning about automating receivables, check out more Esker content!

-Written by, Taylor Bucher

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