The current uncertain economic climate caused by the COVID-19 pandemic is, for many, bringing back memories of the 2008 recession. In these fast-moving times, we see the importance of maintaining the smallest possible DSO levels come to the forefront in order for businesses to maintain a sustainable cash flow. As a result, during challenging times we often see a renewed spotlight of importance shone on the accounts receivable departments, as indeed we are seeing now. But where was this focus in the times of relative stability between 2008 and now?
Applying past lessons
Businesses are coming to the realisation that the previous almost-decade of cash-rich stability was a window of opportunity to reinvest into the business, particularly in the often overlooked area of innovating and increasing the efficiency of the accounts receivable department. As of course, in times of need, it is this department which can play the biggest role in ensuring the reliable flow of cash into the business. Whilst other areas with organisations have been undergoing transformational digital innovations, the accounts receivable department has often been left behind, burdened by myriad repetitive, manual tasks. With fresh challenges facing global economies, now is the time for businesses to prioritise the accounts receivable department.
Creating real change with technology
Cash is king, and ensuring that more of it is coming in will benefit the business as a whole. Equipping the accounts receivable team with the right technology can bring many benefits, including reduced debtor days and time spent on disputes and customer segmentation, plus a decreased impact on margins. What’s more, implementing systems that offer greater visibility across the business as a whole can help to bring the credit controllers and sales teams together to work side-by-side, which can offer richer opportunities for business development and the maintaining of client relations.
Beyond the fiscal opportunities, the impact of reducing the amount of repetitive, manual tasks for those within the accounts receivable department cannot be overlooked. Not only will doing so speed up processes and reduce the risk of human error, but it also frees up time for finance professionals to spend doing more value-adding tasks, such as considering deeper analysis and strategies for improvement.
Applying new technologies also offers the potential to change any negative perceptions that the wider organisation may have of the team by bringing them in line with the rest of the business. With the process of reporting automated, this makes delivering crucial insights to the senior management team a more seamless process for both parties, meaning that key business decisions can be made quicker.
When considering how the accounts payable and accounts receivable teams work together, whilst the two departments typically work separately, there is also benefits to aligning the technology used by both. For delicate contra accounts that both buy and sell from organisations, ensuring greater visibility between the two sides of the account can avoid any embarrassing instances of chasing a customer for payment when the business itself might owe a large sum to the same customer. Bringing both departments in line with similar technologies can create harmony and a more transparent strategy across the business moving forward.
Even before the Covid-19 pandemic, forward-thinking businesses have been gradually moving towards digitisation in all areas. Automation is now a crucial part of many of today’s finance departments, however looking ahead, the focus must be on ensuring that the benefits of this technology are being enjoyed by all. In terms of talent retention and development, embracing the right specialist credit management solution will not only assist those finance professionals in the accounts receivable team in their typical working day, but also streamline costs for the business as a whole.
In short, the lessons of previous recessions and times of difficulty need to be applied moving forward. It is not enough to only consider the crucial role of the accounts receivable department in uncertain times, but rather they should be prioritised in periods of stability too. This will ensure the business has the cash it needs to innovate and invest in the technology to future-proof their operations and ensure continued success.
Colin Sanders, Senior Business Executive, Onguard