As a Finance or business leader, you know that the Account Receivable function is more than just another box on your organizational chart. In fact, it’s not only essential for maintaining a healthy cash flow, but when managed properly, it allows your business to grow exponentially.
Yet, effectively managing Accounts Receivable can be a time-consuming, complicated process, particularly for small and mid-size businesses. And organizations that find ways to streamline their accounts receivable processes can help improve cash flow, and be more competitive, in the long term.
Key Sections
How Do I Know if I Need to Streamline My Accounts Receivable Processes?
Your first step in streamlining your Accounts Receivable function is to determine how effective your current collection processes are. Here are several Key Performance Indicators (KPIs) that you can help you make that determination:
Speed of Invoicing
Prompt invoicing typically translates into prompt payment. How fast are invoices being sent out once work is completed? Can you reduce that number?
Days Sales Outstanding (DSO)
DSO focuses on the average amount of time each customer takes to pay. Is your team proactive in following up with customers regarding invoices? Are you able to offer incentives or payment terms to customers that will encourage them to submit payments sooner?
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Aging of Receivables
Similar to DSO, Aging of Receivables is a glimpse into a firm’s outstanding payments and helps it organize and evaluate the status of its accounts receivable. Are your credit policies affecting cash flow?
Collections Efficiency Index (CEI)
A vital metric for Accounts Receivable efficiency, a high CEI denotes success with receiving payments by comparing actual to potential collections. Any score 80 or higher denotes effective processes while scores of 50 and below denote a strong need for improvement.
What Are Some Ways I Can Streamline My Accounts Receivable Processes?
Once you are able to determine that your current Accounts Receivable process is inefficient, it’s time to get to work. And while streamlining processes in a living, breathing organization might feel akin to navigating a maze, remember the goal is to simply ensure your cash flow is smooth and efficient.
To that end, there are several strategies you can employ to optimize and streamline it.
Develop a Clear and Well Documented Process
Having a straightforward, step-by-step standard operating procedure (SOP) that includes not only Billing but also Collections will help create consistency on the Accounts Receivable team.
Automate Your Invoicing
Automation eliminates the need to manually prepare, send, or find invoices. It also helps reduce costly errors and provides real-time reporting to monitor the health of your cash flow.
Automate Your Collections
Automation enables teams to be more efficient by reducing time spent on administrative tasks like payment matching, client communication, handling of exceptions, and dispute resolution while providing analytics that can be filtered by customer.
Process Payments in Real-Time
Automated payment gateways allow for quicker payment processing and improved cash flow. This means you aren’t waiting days for funds to clear and are able to use them as soon as they’re received.
Establish Credit Management Policies
Having clear Credit and Risk Management policies provides an unbiased method to monitor and assess the collections risk of each client.
Provide Dispute Resolution Training
Disputes over invoices delay payments. Thus, the Accounts Receivable staff should be trained to handle disputes diplomatically and can find resolutions quickly.
Break Down Communication Barriers
Collaboration tools allow teams to coordinate activities around sales, invoices, payments, and other Finance & Accounting tasks thereby enhancing productivity and ensuring seamless business processes.
How Do I Effectively Streamline My Accounts Receivable Processes?
Given the importance of both streamlined Accounts Receivable processes and talented Accounts Receivable staff, you might be asking, “Do I have the right people in the right seats to ensure my cash flow is smooth and efficient?”
Finding the right Accounts Receivable Specialist talent for your organization can be daunting, but that’s where VALiNTRY can step in and help. We’re not just an established Accounts Receivable Staffing Agency, we’re your trusted partner in assembling the perfect Finance & Accounting team. We blend cutting edge technology and extensive human expertise to ensure you find exactly the right talent to ensure your Accounts Receivable team is a well-oiled machine.
Choose VALiNTRY as your Trusted Accounts Receivable Staffing Partner
Partnering with VALiNTRY as your trusted Accounts Receivable Staffing Partner can help your organization reduce costs, save time, and ensure efficient cash flow.
With over a decade in the business of recruiting Accounts Receivable Specialists across various industries, VALiNTRY’s recruiters are ready to use their extensive expertise to uncover the candidates with the skills you need to be successful.
Contact us today to discover how VALiNTRY can become your preferred Accounts Receivable Staffing Agency!