What Is Predictive Analytics And How It Can Better Your AR

Nicole Dwyer | Friday, Jul 22nd 2022
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How smart, predictive analytics creates more working capital

You’ve likely seen the term on LinkedIn and in your email box - “predictive analytics”. 

You probably have a sense that it’s about leveraging data, but your immediate concern is cash flow. Analyzing the data from all your different data sources would be amazing, but right now, your mission is driving the core AR processes that keep money flowing into your business.

And that is exactly why you should take the next two minutes to understand predictive analytics a little bit better, and what it can mean to you and your cash flow.

So what is it, anyway?

Predictive analytics is the art of using advanced analytics and techniques like data mining, statistics, modeling, machine learning, and artificial intelligence to analyze current data and make predictions about the future.

When it comes to AR, we can use algorithms to identify behaviors regarding past-due invoices and risk, then project the potential stability and credit-worthiness of a customer, or estimate when payments might be late. The ability to forecast your cash flow means you understand the health of your business, of your customers’ business, and can take proactive steps to ensure that the relationship continues smoothly. Or you can mitigate risk before it becomes a major business issue.

Why does AR care about predictive analytics?

Tell me if this sounds familiar: a customer calls in with a question about an invoice from three months ago. They short paid it. Now they’re trying to track the paper trail as to how much they paid, why they short paid it and what’s due today. 

Now your team member is faced with a process. 

  • There are disparate information systems, so time is spent logging in and searching each to put the full story together of the customer’s account for the past 90 days. 
  • If one of these repositories has inaccurate or outdated information, that can slow down the understanding of the customer’s account.
  • There are legacy processes and tools that do not allow your team to properly segment customers, which typically means the collections process is also outdated. This leads to the further spread of misinformation and potential customer frustration.
  • You then need to supply the requisite documentation back to the customer and spend time on the phone walking through the materials to come to a mutually agreeable resolution.

This is a lot of time, effort and energy - and money - spent on a process that isn’t actually generating revenue. 

Think about the impact the lack of predictive analytics potentially has on your business today.

  • Time is wasted on non-productive activities that don’t contribute to cash flow
  • Employees are frustrated by outdated tools and processes
  • Average collections is only 70% of actual amount due, so money  is left on the table
  • Customers are unhappy about the time it takes to resolve invoicing questions 
  • Average DSO across industries is 30-50 days, leaving cash trapped in your AR balance sheets

How does predictive analytics solve this?

A smart, predictive analytics tool can solve multiple issues and divert issues before they exist. A smart tool can help you understand which invoices are likely to be overdue, and by how long - the aging of those overdue invoices. 

How does having this information help you? 

  • Smart efficiency: easy access to disparate data sources, unified and presented in a single, easy to read dashboard
  • Smart credit: by analyzing the data available about a customer in the earlier credit stages, you can identify which ones are potentially higher risk and segment them accordingly
    • Segmenting customers allows you to develop processes for credit and collections that matches their behaviors and minimizes your risk
  • Smart visibility: Anticipate customer behavior, predicting late payments and potential invoice aging, which allows you to proactively manage the account before it falls behind
  • Smart collections: Define and enable a collections process that your team can confidently communicate and follow, knowing exactly where to focus their efforts

This doesn’t have to be complicated

A smart tool for smart AR doesn’t have to take a PhD. to understand and an army to deploy. In fact, the whole point behind an intelligent tool is to simplify your business for better decision-making. 

At YayPay, we simplify the AR process  with one platform, one system, one code base. Our cloud-based solution utilizes advanced machine learning to drive a 3X improvement in productivity for AR teams. YayPay’s automated communication workflows allows your AR team to interact with more customers, with less effort, and focus on priority accounts that produce positive cash flow. YayPay integrates with many accounting, ERP, billing, and CRM applications, giving you a complete and accurate look into the collections process to help you better predict cash flow and increase revenue. Our proprietary predictive analytics engine identifies credit risk and reduces the potential for revenue losses, driving smart business decisions. 

  • Payment predictability: Machine learning enables the finance team to reliably predict vendor payments.  This provides the finance team tools to identify collection actions and accounts to be spending their time on thereby providing visibility into the future payment/cash flow (lifeblood) of the business.
  • Payment Behavior Analysis: Tools to monitor customer internal credit scoring designations, based on past payment performance.  This allows for companies using YayPay to identify trends in customers’ behaviors which may indicate a need to dedicate more Collector time and attention to accounts falling behind on payments.  This provides the business another tool to potentially determine the appropriate credit terms to extend to a business.
  • Real-time AR Collection Analytics: Comprehensive library of common AR and collection dashboards which summarize and display historical trends (DSO, APT, Cash Collected, Current and Overdue invoices, Open Invoices, Email Reminders, Cash Collected) and a predictive future for cash collections across the business:
  • Smart collections policy: Centralized administration to implement collection policies across the business to accurately and with predictability standardize the cash collection process across all channels, business units and applications.

Predictive analytics has a direct impact on your working capital and ability to run a healthy business.  By finding a smart solution, one that is easy to deploy and simplifies your processes, you can enjoy reduced past-due invoices, improved collections efficiency, and a better understanding of your customers. And a healthier cash flow. 

Learn more about YayPay and our predictive analytics engine by visiting our website or contacting a representative. 

Watch the replay of the webinar, Using Smart Technology to Become a Revenue Hero, with Mehmet Shah, Director of Finance for StackAdapt, as he talks with Nicole Dwyer, Chief Product Officer at YayPay, about how data management, automation and transparency are key for his team’s ability to manage the entire credit-to-cash process in today’s challenging Covid-19 environment.