Institutions have varied and different challenges, but one constant is that cash is critical. In a recent report by PwC, “64% of respondents noted they have an increased focus on working capital management.”
At a time when cash won’t be as free-flowing as in recent times, the management of cash, the need for working capital, and the realization of profits are now at the forefront for all business leaders. In late 2019, PwC released a report that showed that $1.2 trillion dollars of cash were being held captive on company balance sheets because of late payments by customers.
This begs the question, how has COVID-19 impacted this number?
There will certainly be several challenges going forward, with the desire to increase sales while managing the risk of late and non-payment. Many recent reports are estimating that business failures will increase by over 30% in the next 12 months.
None of these is new business challenges. But the challenges we have faced in the past 12-18 months have received great focus and highlighted the need for good accounts receivable and credit management now. More than ever before, it’s clear that the way we’ve always done before is not a sustainable strategy.
A Catalyst for Change
Throughout 2020, our working practices and where we perform our duties have changed beyond what we might have expected at the start of last year.
CFOs are reconsidering the cash management process. Credit and finance professionals have been forced to review how they perform certain processes and tasks involved. Cash application has been one of the areas in the spotlight as electronic payments have increased and replaced checks.
While it is always good to have money in the bank, this has caused a knock-on effect on the application of payments. This is because the remittance for the payment could have been lost in transit or is in someone’s inbox—who may be furloughed or no longer with the department.
This results in an increasing amount of unapplied cash and an increase in the amount of re-work required to complete the reconciliation. This ultimately impacts the visibility into the debt that’s outstanding for the credit controllers to collect and consuming time that Accounts receivable (AR) teams would prefer to use engaging with customers.
Intelligent automation of cash application
The need for quick and accurate cash application is crucial now. The need for visibility into every sales ledger account also increases to show real-time debtor positions.
This proves that now is the time for intelligent automation of the cash application process. It’s also time that processing customer payments is not only maintained but improved.
Intelligent automation of the cash application process is not just about deploying robotic process automation to eliminate manual tasks. It is also about shrinking the processing time and manual effort by layering machine learning to reduce the tasks required.
The emergence of AR intelligence
AR Intelligence provides access to real-time, actionable information, such as customer financial behaviour data, to enable F&A teams to better manage strategic and operational decision-making.
AR Intelligence is built to provide decision intelligence for accounts receivable and credit professionals as they manage cash collections and balance the risk of late—or worse, non-payment—while providing credit to customers.
Equipped with a full suite of reporting capabilities, teams can spot trends around cash flow, payments versus terms analysis, and customer behaviours, including insights into both customer payment performance and customer sales.
This means that accounts receivable and credit professionals are able to make more informed decisions using real-time decision intelligence.
In addition, a day's sales outstanding (DSO) reporting package can reduce time to measure individual business units. That time can then be spent on deciding how improvements can be made, both strategically and operationally.
The information that AR Intelligence delivers benefits not only credit and accounts receivable teams, but also the office of the controller, treasury, and perhaps more significantly, the sales operation.
Be ready, be resilient
Change has happened and change will continue. We can be sure about that. We know things will not return to ‘normal,’ but we don’t know what the future will look like.
So, now is the time to be resilient and put changes in place that will improve your performance in both efficiency and effectiveness today and make you resilient for the challenging times we face ahead.
Intelligent accounts receivable, starting with the automation of cash allocation, is now a no-brainer.
