All businesses need positive cash flow to function. When money doesn’t come in, suppliers don’t get paid, and the company can’t offer its products or services. This means there is constant pressure on effective and efficient accounts receivable (AR) to bring in cash in a timely way. If it doesn’t, businesses may resort to borrowing and pay interest on loans.

This is the second in our blog series examining how to optimise AR processes to improve business efficiency, cash flow and customer satisfaction. The first considered the commoditisation of AR and how to deliver business improvements through a single AR platform. This blog will explain how automating AR improves cash flow.  

Poor cash flow is the death of business

When you consider that only four out of ten small businesses are still trading after five years, the importance of slick processes for collecting payments becomes apparent. A study by Ormsby Street revealed that poor cash flow remains one of the main causes of problems.

The health of a business relies on getting paid and the time this takes is a factor too. The longer an invoice goes unpaid, the less likely it is that it will ever be settled. Plus, the value of it will decrease over time, particularly when you factor in the cost of time spent chasing payment.

Six ways Accounts Receivable automation accelerates cash flow

Instead of manually keeping track of payments, checking spreadsheets and emails and contacting colleagues to find out the status of accounts, AR management can be centralised through a single platform. Through automation, the platform takes care of when customers are contacted, and how, to chase up due invoices. Digitising AR processes can turn around cash flow by bringing in payments faster and more efficiently through better communication and co-ordination.  

Here’s why AR automation accelerates cash flow:

  1. Cash is collected faster
    An AR platform manages when and how customers are followed up with to secure payments. This guarantees 100 per cent account coverage, with every customer contacted at the right time and in the right way, according to the method of communication they prefer. Each customer contact is consistent and draws on the latest, up-to-date account information to minimise queries which would otherwise further delay payment being made.

     
  2. Problem accounts are identified
    Through machine learning, which draws on algorithms in the system, payment cycles for customers are produced. This is insight that can be used to decide how and when to contact customers for the best payment results. It can also identify at-risk payments so that teams focus on the areas that require the most attention.

     
  3. Accounts are filtered by oldest debt
    There’s a certain amount of jeopardy in manual processes that follow up with customers. Those at the bottom of the list might not get contacted because the AR team has finite resources to chase payments. This results in inconsistent levels of contact with customers and the potential that accounts at the highest risk of bad debt get the least attention. Filtering according to oldest debt prevents this from happening. A centralised AR management platform has all the data for comprehensive insight into what is owed, by whom and when and a complete audit trail of contacts.

     
  4. Working capital costs, including weighted average cost of capital are reduced
    Businesses lacking cash will need to borrow and this will increase their average cost of capital when they have to pay interest on those loans. Bringing cash back into the business through effective AR processes negates the need to borrow and improves the weighted average cost of capital (WACC).

     
  5. Bad debt is reduced
    By getting payments in quickly, businesses avoid writing off bad debt. When an outstanding debt takes a long time to recover, companies can spend as much as the debt is worth chasing payment. This is a situation to avoid by streamlining AR processes to collect payments swiftly and efficiently.  By anticipating and predicting bad debt, companies can head off problems before they occur.

     
  6. Resources can be reallocated  
    Bogging AR teams down with mundane follow-up activities takes time away from conversations that could make a real difference. By automating repetitive tasks using data in the system, time can be reallocated to activities that will have the most positive impact on cash flow. In this way, automation enables personalised customer contacts at the right time.

AR automation accelerates cash flow to reduce the cost of capital and equip businesses to provide their products and services. It does this by cutting the time teams have to spend manually following up customers, providing access to accurate information at the right time in the right way, and focusing resources where they are most needed. To find out how your business could benefit from AR automation, take a look at YayPay by Quadient.


Warren Moir
Software Sales Enablement Manager

An experienced enablement and partnerships manager, Warren helps customers realise the benefits of their investment in AR solutions. With 20 years of experience working in the computer software and accounting industry, Warren partners effectively with buyers, administrators and finance users of AR management platforms to ensure a smooth transition and the rapid building of skills within organisations.

Warren designs, develops and delivers training development programmes and provides subject matter expertise to AR departments making the move to automated AR functionality.

Warren Moir

Warren Moir

Software Sales Enablement Manager

An experienced enablement and partnerships manager, Warren helps customers realise the benefits of their investment in AR solutions. With 20 years of experience working in the computer software and accounting industry, Warren partners effectively with buyers, administrators and finance users of AR management platforms to ensure a smooth transition and the rapid building of skills within organisations. Warren designs, develops and delivers training development programmes and provides subject matter expertise to AR departments making the move to automated AR functionality.

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