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Paid in full: How automation can help your company collect payments faster in 2022

Feel like it’s taking your business far longer to collect payments than it did a year or two ago? It’s not your imagination, unfortunately, and you’re far from alone.

Recent research suggests one of the unfortunate side effects of the global pandemic has been the stretching out of payment times – by weeks, rather than days, in many cases. 

Almost 80 per cent of businesses said their Day’s Sales Outstanding – the average number of days it takes an enterprise to turn a sale on credit into cash in the bank – had risen since the Covid induced recession began, according to a 2021 survey by the Institute of Finance and Management in the US.

Aged balances have also grown in 48 per cent of businesses.

Finance leaders are far from happy about this new status quo, with 55 per cent of survey respondents expressing dissatisfaction with the performance of their accounts receivable departments.

Keeping the cash flowing

Here in Australia, the Federal Government is doing its bit to boost cash flow by throwing its support behind a scheme to get payments flowing faster to businesses at the small end of town. Launched in January 2021, its Payment Times Reporting Scheme requires companies with an annual turnover in excess of $100 million to publicly report their payment terms and practices to small business suppliers.

It was hoped the introduction of transparency would help those small enterprises weigh the risks and benefits of doing business with their much larger counterparts and incentivise the top end of town to start paying more promptly.

While it may be too early to say whether the Scheme is achieving those objectives, businesses that want to maintain a healthy financial position may favour a more proactive strategy; one that allows them to take the guesswork out of cash flow lowers their borrowing costs, minimises revenue loss and enables them to manage customer relationships more effectively. 

Exploring the automation advantage

Automating your accounts receivable department can help you do all these things and free your team up to do higher-level work in the bargain.

What does it entail? In short, eliminating many of the repetitive manual processes that are part and parcel of the process of collecting payments – recording transactions, sending invoices, updating ledgers and managing the dunning process.

This has been bread and butter work for accounts receivable employees forever but, in 2022, it no longer has to be. A cloud-based, automated accounts receivable solution can perform many of these tasks, accurately, cheaply and fast.

Migrating to such a platform can reduce manual processing by more than 85 per cent and reduce the cost of maintaining an accounts receivable function by an impressive 70 per cent.

Managing receivables better

But automating accounts receivable doesn’t ‘just’ eliminate the grunt work, slash costs and get funds flowing into your account faster.

It provides access to a wealth of insights into your trading relationships with customers, and the impact of those relationships on your financial position and risk exposure.

For example, using AI-powered data analytics technology, you’re able to track and measure your sales and payment terms over time, in order to gauge which customers are prompt payers and which are persistently tardy. Payment forecasting can help you circumvent cash flow crunches by providing you with a detailed prediction of your future position, based on debtors’ past payment patterns.

Meanwhile, decisions about whether to extend or rescind credit can be made based on up-to-the-minute customer profiles and behaviours, rather than optimism and gut feeling on the part of your sales team.

Cash in the bank: Strengthening your company’s financial position in 2022

This year is bringing challenges aplenty for Australian businesses, as they recover, restructure and rebuild in the wake of the Covid crisis, and position themselves to take advantage of emerging opportunities. 

Healthy cash flow and a strong bank balance will see your organisation well placed to tackle whatever the future has in store. Automating your accounts receivable function is a sure-fire way to achieve both ends.

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Claudia Pirko

Claudia Pirko

Claudia Pirko is the Regional Vice President – Asia Pacific at BlackLine, a leading provider of cloud software that automates and controls financial close and accounting processes.

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