Economic uncertainty isn’t fun, but how well your company weathers the storm of downtimes can lead to valuable lessons, long-term growth, and outmatching the competition.
Modernizing your accounts receivable (AR) represents one way to give you a better and more precise forecasting method. You’ll still need to make decisions based on the numbers you see.
The experts at The Whitlock Co. will discuss how and why you need to modernize your accounts receivable to improve your revenue forecasting.
Balance Analytics & Human Thinking
At their heart, businesses thrive on human relationships. Yet humans also rely on modern technology to make their lives more convenient. You must balance looking at your accounts receivable analytics while knowing when to make a human intervention when you see the numbers.
You need to understand that not “any old” payment system will work for modern accounts receivable and accounts payable (AP). You must create a seamless electronic payment system. Make sure your payments system is secure, uses robust encryption, and keeps unauthorized users out. On the other end, whoever pays you should have a range of payment options, whether it’s ACH, debit/credit, or even a third-party payment system. There are many choices out there for your company, so choose wisely. Look for a payment system that integrates with other modern systems and software while maintaining security.
Reduce Payment Friction
Regular payments are the lifeblood of your business. Consider increasing your use or acceptance of digital payments for your finance department.
Reduce or eliminate these payment frictions:
Paper. Creating, sending, and mailing paper invoices is old school, and it’s also very insecure, time-consuming, and eats up your resources. Consider moving on from customers that still pay with paper checks.
Managing unstructured data. Many new payment portals have unparsed, unstructured data that can prove valuable to your team. For example, how long did it a take a customer to pay over the span of 12 months? Was the average 12 days? 23 days? 45 days? Analyzing the unstructured data in your system can lead to valuable insights that reduce your payment friction. A full ERP system can give you insights into the unstructured data, allowing you to have more accurate numbers.
Payment preferences and terms. There is always a sweet spot between suppliers and buyers when it comes to accounts receivable and accounts payable. Suppliers want their money more quickly, while buyers want to delay payments. Strike a balance between the two. For procurement-heavy companies, a procurement system will help and work with an ERP to derive insights between when you send an invoice and when you receive payments. Data enables you to negotiate terms later on.
Reconciliation and posting payments. As your volume increases, so does the complexity of reconciling and posting payments. Increased transaction volumes can make your staff work harder. Consider using platforms that analyze data between your payments and finance systems. They can give you insights into how soon you need money to balance your books, where you might face difficulties in the future, and when you should expect payments to post to your business accounts.
What to Look for in Digital Systems to Support Fiscal Resilience
AR and AP systems have similar functions in that they manage monetary transactions. Automating everyday functions can alleviate a lot of stress on your staff. Setting alerts for anomalies, like when a payment is overdue or early, gives your finance staff the confidence to act quickly when something goes awry.
Automation gives your staff a chance to focus on making strategic decisions and planning, so they can be more proactive rather than reactive.
Other attributes to look for when automating accounts receivable:
Visibility of invoice delivery. You can see when invoices were delivered to customers and then when they are paid. You won’t have to hunt for individual invoices, and, instead, see a handy chart of invoices across a singular customer or your entire spectrum of customers to gain insights as to when they are early, late, or on time. You can use these numbers to negotiate at a later point.
Tracking decoupled payments. Sometimes, your chosen vendor or buyer doesn’t have a payment system that works with your platform. This is where having an ERP comes in handy, to track any unstructured data that your system may derive from a third-party payment provider such as Stripe, Western Union, or other payment systems. You might find this functionality worth it if you have foreign companies you work with regularly.
APIs and low-code applications. If you have legacy systems that still work but don’t want to invest in a full ERP, having an API or low-code application can be a less expensive alternative.
Don’t Forget Human Insights Into Your Numbers
All of the numbers you collect mean nothing without a human interpreting them. You know your business model better than anybody. Sometimes, you need an objective third party to look over your numbers to give your numbers some context.
The advisors at The Whitlock Co. can help your business plan for the future. Contact us or call (417) 881-0145 for more information if you own a privately held company.
