As many businesses are adapting to new ways of working during the pandemic, maintaining a healthy cash flow is mission-critical. Having a reliable source of working capital to secure steady revenue and accelerate growth post-Covid-19 is one of the primary focuses for finance executives. With cash locked in your biggest asset: your debtors, retooling your accounts receivable functions holds the key to accessing cash now and for the future. So here are four actions you can deploy to supercharge your cash flow.
Accelerate your receivables
Yes, it is possible to improve your cash flow even more so in times of economic uncertainty. As debtors are your biggest asset, consider streamlining your key financial processes, and start with improving your collection strategies. In their recent report Managing cash flow during a period of crisis, Deloitte suggests that improving the rigor of your collection processes is critical right now. Timely and accurate invoicing is key as any errors in your billing process can lead to costly delays in receiving payments.
Deloitte also recommends focusing on customer-specific payment performance and identify companies that may be changing their payment practices. There are automated solutions that will look at your company’s historical payment trends and develop automated collection strategies to help reduce DSO and aged debt. They will also save your team time applying cash more accurately and faster so they can focus on debt recovery and dealing with exceptions.
“Focus on customer-specific payment performance and identify companies that may be changing their payment practices. Also, get the basics right, such as timely and accurate invoicing. Any errors in your billing process can lead to costly delays in receiving payment.”; Deloitte, COVID-19 Managing cash flow during a period of crisis.
Revamp your risk strategies
Revisit your risk strategies to unlock more working capital and generate new revenue streams. With smart and automated customer segmentation and insightful data into their payment pattern, you can identify the least risky and most profitable customers and offer them extended credit terms. Unnecessary credit limits might hold discouraged customers from doing business with you while customer retention seems pivotal right now. Beyond a shadow of a doubt, an improved debtor relationship enhances your customer satisfaction and in effect increases your sales.
Overall, this strategy will not only improve customer relationships but also maximize profitability, and minimize risk.
Enable tight integration between front- and back-office
According to the recent article from CFO Dive “Getting through the downturn by improving receivables”, customer onboarding contributes significantly to maintaining a healthy cash flow too. Success means working closely with sales, and others involved on the front end to bring together all of the functional areas to improve the full financial customer lifecycle, from pursuing the right sales opportunities to dispute resolution, with better visibility and control. Bridging the gap between sales and accounting gives companies a real-time view into customer behaviors so that they can make smart decisions and maximize profitability, and minimize risk.
The front- and back-office connectivity that delivers consistency and compatibility between the different functional areas within your organization is key for accelerated growth and success.
Finally, finance teams need automation more urgently than ever. Using software that automates the manual and time-consuming aspects of AR not only makes cash processing less reliant on manpower but more importantly frees up your team to focus on managing exceptions and improving customer relationships. Furthermore, costly errors associated with manual data gathering and processing can be fully eradicated leading to enhanced debt collection and improved working capital.
AR departments should consider these 3 steps on their automation journey:
Step One: Survive
Step one is to automate the repetitive and manual process, reduce cost, and drive efficiency. Only by doing this can you get control of your processes and have time to think about change
Step Two: Transform
Step two is to understand your processes and analyze so that you can drive change. Without knowing what is wrong how can you know what to improve and the impact you will have by doing so.
Step Three: Accelerate
Step three is to predict future outcomes, understand your customers as the assets they are, and become a business partner to Sales & Treasury in driving growth, profit, increased cash flow, and reduced risk.
Be a change catalyst and choose a way of doing things differently. Key for success is partnering with a vendor who will understand your pain points and take you through that transformation process end-to-end delivering a highly optimized customer journey, and contributing tangible value adds to your business making you a hero.
One thing is for sure, taking measures now to improve your cash by turning your attention to your accounts receivable function will help you avoid a serious cash flow crunch later. See how finance leaders are successfully navigating this tricky landscape and are future-proofing their finance function.