5 Accounts Receivable challenges and their solutions

Accounts Receivable (AR) leaders and companies faced hurdles, especially after the pandemic for the past 2.5 years. The way of working is very different from what it was before. Research shows that debts written off as uncollectable showed an alarming 50% increase in the Singapore market, According to a report from atradius: 2022 edition of the Atradius Payment Practices Barometer survey findings. Bad debts are trending upwards, and collection costs are getting higher. Lowering your DSO may take more significant effort. Long cycles of invoice to cash affect cash flow in many organisations. This article will address the common accounts receivable challenges faced and its solution.

5 Accounts Receivable Challenges faced today

1. Inefficient Invoice Delivery

Getting the invoice to the customer is often not as straightforward as you think, even though pigeons, horses or snails are no longer involved. Now that the days of exclusively paper-based transmission are over, delivery methods vary from email to fax to EDI and beyond. More recently, the Peppol, also known as InvoiceNow is introduced in Singapore(very soon to the rest of Asia). Many businesses benefit by receiving and sending invoices in a standard format without hassle. The steadily increasing e-invoicing regulations and standards in many countries make it easy to feel constricted by the abundance of choices or individual customer demands.

The solution to efficiently deliver your invoices in any media:

Automated invoice and statement delivery allow you to streamline billing and document archiving on your end, all while maintaining compliance and respecting the delivery preferences of your customers. Deliver your AR invoices automatically in any media using a solution that can suit your customer preferences.

2. Increasing DSO (Day Sales Outstanding)

Today, your collections strategy may need to be adjusted to continue to bring efficiency to your collections process. But considering all the manual work involved in getting slow-paying customers to be proactive, most companies don’t have the time/staff to make contact as early and often as they’d like. Therefore, your AR staffs have a critical role to play: executing the collection process to decrease your DSO (Day Sales Outstanding). Having proper collection management will help you in this process.

The solution to increasing your DSO (Day Sales Outstanding)

Your priority needs to be collecting all the cash that can be managed, 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! Here are some of the things you can achieve with a collection management solution:

  • Payment reminder emails. Reminder emails can be sent to customers (personalised with your branding) about past-due and upcoming invoices and an updated list of their available credits.
  • Scheduled reports. Instead of having staff manually put together a report and sending it out, customised reports can be automatically delivered to anyone via the automation solution.
  • Customised to-do lists. Help your AR reps prioritise which customers need to be contacted by creating customised to-do lists that directly house all the necessary info at their fingertips.
  • Account lookups & call logging. Users can quickly scan a call task list and view a snapshot of any customer account; after a customer is contacted, any notes and scheduled follow-ups can be logged.
  • Assign tasks to others. When necessary, team members also can assign a task to an individual outside the AR department (e.g., sales).

3. Late Payments

There are many reasons why customers are paying late. And one of the biggest reasons is that companies have minimal payment methods, and the traditional way may take longer for them to make payments on time. Make sending a payment easy for your customers. Not only will the money hit your account faster since it works the first time around, but nobody has to struggle with different interfaces.

The solution to Speed up payment cycles:

To ensure convenient and easy payment methods for your customers, today’s businesses need online payment capabilities at different steps of the order-to-cash process. Thanks to Esker’s advanced online payment capabilities, your customers will have no reason not to pay and can even benefit from early payment discounts by paying before the due date.

Offering your customers different payment methods, including advanced online payment capabilities, will help your customers pay you faster. Additionally, providing early payment discounts to customers who can pay earlier will help you build a better relationship, maintain a healthy cash flow and, more importantly.

4. Improper communication with customers

As you have heard, communication is the key to many successes ahead. Proper communication with your customers improves business relationships and solves disputes faster.

The solution to better communicate with customers

Instead of hounding your AR staff for help making payments or getting invoices, an online portal allows customers to take care of these tasks independently. Learn more here.

5. Manual reconsolidation of incoming payments

Managing multiple payments (e.g., banks, lock boxes, emails, PDFs)and different levels of data in each document can be a real pain for your employees trying to allocate cash in a timely and effective manner.

The cash application process is the final step in the Accounts Receivable cycle. It ensures that all customer payments are correctly applied to the correct invoices. This can be done manually by a company’s accounting department – with employees looking at each payment and applying it to the corresponding invoice – or automatically using software designed for this purpose.

The solution to the manual reconsolidation of incoming payments

With auto cash application, the payments are matched to the invoices electronically, eliminating manual processing. This not only saves time but also reduces the chance of human error. Esker’s Accounts Receivable – Cash Application Solution offers an intelligent way to increase efficiency and boost your business’ financial management.

Read how international SOS Achieve success with Accounts Receivable solution here.

In Summary, what are the solutions to your Accounts Receivable challenges?

Get paid faster with Accounts Recievable Automation Solutions

  • Optimise your AR invoicing by delivering timely invoices aligned with customer preferences & legalities
  • Automatically upload invoices to your customer accounts payable portal easily using robotic process automation if necessary
  • Offer a wide range ofpayment methods to your customers to accelerate payment cycles
  • Resolve disputes as soon as possible using intelligent AI-driven claims & deductions capabilities.
  • Provide a self-service customer portal for your customers to retrieve information they need and communicate easily with you easily
  • Simplify your collections & reduce DSO, improve visibility with timely reminders and improve collaboration by offering your employees a simple-to-use collection management platform
  • Allocate your cash faster by eliminating the effort & errors out of the process — from remittance to reconciliation.

-Written by, Michelle Foong