Taking stock of what they’ve learned in recent years, businesses are assessing their accounts receivable operations, adopting digital practices and making other changes. If you aren’t among those organizations, now is the time to evaluate your accounts receivable strategies to find efficiencies.
Paper payments require staff to make deposits several times a week, and in some organizations weekly or twice a month. But the process may be slow and can delay deposits, ultimately reducing days sales outstanding. That’s why many organizations are transitioning customers to electronic payments, which allows payments to be deposited automatically as soon as received.
Long-term solution: There are different approaches you can take to address this issue based on your relationship with the client.
Remote work dramatically increased in recent years. Many businesses operate entirely remotely or with a hybrid work schedule. As a result, manual accounts receivable processes are more time consuming, making digitization and automation paramount.
Long-term solution: Companies can analyze their current methods and invest in streamlining them. Their review may include:
Organizations began receiving more late payments and delinquencies during the pandemic, and the problem has persisted. Many businesses responded by making short term credit accommodations. In the long term, however, businesses may need to focus on their credit strategy.
Long-term solution: Moving forward, organizations may want to revamp their credit strategy and collections processes. Consider renegotiating existing customers’ payment terms, providing customer incentives to pay sooner and offering customers short-term relief in exchange for prompt or partial payments.
For new clients, you can implement a four-part credit risk assessment that examines:
Best practice is to conduct periodic customer reviews. It is essential that these reviews incorporate key performance indicators to ensure none of these areas have drastically changed.
Amid economic uncertainty, assessing and optimizing your accounts receivable strategies and processes is critical. You can make adjustments, whether increasing technology and digitization adoption or implementing efficient and scalable processes, to improve days sales outstanding and the cash conversion cycle.