Increasing your company’s equity by increasing cashflow through lower overdues and DSO
Consumers today want the shortest possible path to what they want. Technology has become the modern day light switch, we want it, we find it, we push a button and it’s there. Take this principle and apply it to collecting money. If you give your customers the ability to find what they need, to then push a button to get it to them in the shortest possible way you will be ahead of the next creditor to be paid.
The Accounts Receivable function within a company is a vital one and ultimately drives (or hinders) cashflow and profitability. It also impacts how the customer views the organization. This can influence their decision to stay or move to a competitor. Customers increasingly require transparency, ease of communication as well as choice of communication – something that they experience as a consumer. As B2C companies evolve to put more information, convenience and choice into the hands of the consumer, there is a trend where customers within a B2B environment also expect this same experience.
A bad debtor’s book has a direct impact on cashflow and profitability and the cost of financing it is considerable. If debtors are outstanding by 90, 120 or 150 days, it simply results in ‘no cash in the bank’. It also impacts a company’s ability to pay their creditors. It increases costs as more resources need to be thrown at the problem but importantly, it also silently erodes margins and revenue.
A common challenge for the Accounts Receivable Department is providing complete and accurate documentation when submitting statements to customers. For example, a customer may receive a statement but won’t immediately be able to identify the work charged for – an invoice number is not enough. In a nutshell, customers often withhold payment as they do not have enough documentation or information. In addition, the invoice may be sent electronically via email but the receiver ignores the message as finding the relevant invoices is an onerous exercise. Having a solution that provides links to all relevant documents within the statement, and the option to interact directly from this statement, can improve collections significantly, assist in resolving queries speedily and greatly improve the customer experience as well as cashflow.
Implementing strong systems creates direct financial and strategic benefits to an organization. While revenue, margin and profit all reside on the income statement, debtors resides on your balance sheet. It’s the balance sheet that determines equity (value) of business and for this reason requires careful attention. By reducing overdues / DSO, you directly improve cashflow and reduce bad debt provision, as well as reducing the cost of capital.
As an added benefit, customer experience is improved. Providing information accurately and timeously brings the customer closer to the organization, and allows the customer to interact with you “in the moment”, giving an enhanced overall and self-service experience. Through automated document delivery, linking and interactive response with Linxus AR Accelerator, customers bypass the often negative call centre experience, and have everything they need from one document through their statement. Retrieving information is quick and easy. The route to the destination is shorter, quicker and easier and works across platforms, mobile, tablet, PC, pretty much on any device.
Linking you. Simply.