How to solve the most common Accounts Receivable Problems?

Accounts Receivable Automation can help your business to overcome the most common challenges in receivables management.

Dimitri Raziev
Founder, Kolleno
Accounts Receivable

Most businesses have accounts receivable management workflows which cover collections dates, methods, and amounts.

Still, analysis reveals that not all companies perform AR management effectively. According to official statistics, £23.4 billion is suffered in late payments by businesses in the UK.

As a result, having too many outstanding invoices can damage your business cash flow. This can limit your business from investing in growth opportunities, new equipment and talent acquisition.

Thus, poor accounts receivable control can cause such unintended outcomes as:

– Not following up on overdue invoices

– Marking overdue invoices as bad debt

– Mistakes on invoices

– Assigning payments incorrectly

In this article, you will learn how your company can solve the most common Accounts Receivable challenges.

Poor cash flow management

Firstly, organising your invoices is the key to knowing what your expected cash flow is. This way, poor AR management can lead to a cash-flow shortage. Therefore, building a transparent system is crucial to deal with your AR efficiently.

How to Improve your cash flow management:

– Centralise your information. Having all information about your receivables in one place solves many problems caused by disorganization. In addition, it will allow every person working on receivables in your company to work on the same set of data. For instance, Kolleno offers an AR software solution that keeps all your receivables information in one place.

Above-average Days Sales Outstanding (DSO)

DSO is the amount of time it takes your company to convert credit sales to cash. Hence, high DSO means that it takes too long for your client to meet the agreed payment term.

How to reduce your company’s DSO:

– Organise your collection strategy and make sure that you are sending invoices on time. Thus, you will show your professionalism, which will improve your customer relationships! In addition, think about sending digital invoices rather than physical ones by mail.

– Offer discounts to incentivise customers to pay early. You can also think about setting penalties for late payments.

– Offer flexible payment methods. Adding more payment methods increases the likelihood that your customer will pay on time, this also increases customer retention rate.

Poor Customer Communication

Setting up a healthy information flow is crucial to having a long-lasting beneficial cooperation. For successful AR Management, it is required to properly organise your points of contacts and channels of communication.

How to improve customer communication:

– Regularly update contact list to avoid e.g., sending invoices to the wrong people or address. Kolleno software keeps your customer contact details updated and makes sure to contact the right people. Hence, this practice allows us to achieve an average of 90% successful recovery rate!

– Take advantage of Kolleno communication automation tools. It allows you to keep the communication process smooth and helps you to send personalised content to each of your customers

Lack of appropriate policies

Not having a well-structured credit policy can lead your business to sign customers that are not the best fit for your business.

How to improve your credit policy

– Review your credit approval process on regular basis. Assess the risks as well as the profiles of the companies you want to do business with.

– Make sure you establish transparent terms of sale, which your customer accepts.

– Perform credit analysis process according to the industry your customer works in. Often, different business requires various methods such as a credit report or credit scoring.

Talk to Experts!

At Kolleno, accelerating your cash flows is our speciality. We offer 5 times faster payments collection and improve your DSO by over 50% on average. Moreover, Kolleno communication automation serves as an additional member of your team. As a result, your team will not have to think about sending payment reminders manually.

Kolleno Benefits include:

– 90% payments recovery rate 

– 5 times faster collections process

– Up to 16 hours saved weekly on manual tasks

If you would like to learn more, get in touch with us via the form below!

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