The recession of 2008 put detrimental strain on global businesses, not least accounts receivable departments. Maintaining the smallest DSO levels possible in the last few months of the year became crucial for keeping a sustainable cashflow. With businesses struggling financially, a renewed spotlight of importance was shone on the accounts receivable departments. With these professionals working to ensure that owed money was coming in quicker, businesses could ride out a difficult economic period with a greater amount of cash available. But in times of relative stability comes complacency and in recent years the crucial work of the accounts receivable department has struggled to gain the same focus as accounts payable.
Applying past lessons
The unprecedented economic impact of the Covid-19 pandemic has echoed the financial pressures that came with the 2008 recession. Businesses are coming to the realisation that the previous almost-decade of cash-rich stability was a window of opportunity to reinvest into the business, particularly in innovating and increasing the efficiency of the accounts receivable department, which will prove so crucial in collecting cash for the business during these difficult times. While there’s clearly been neglect in this area, especially compared to the innovations that have typically taken place in the accounts payable department and elsewhere in the business, now is the time for businesses to embrace technology and make that change.
Creating real change with technology
Cash is king, and ensuring that more of it is coming in will benefit the business as a whole. So why has there been a notable delay in implanting beneficial digital transformation policies here?
There are many benefits of doing so. Equipping the accounts receivable team with the right technology can enable organisations to reduce debtor days and time spent on disputes and customer segmentation, decrease impact on margins, and bring the credit controllers and sales teams together. Much of the work within accounts receivable is traditionally perceived to be ‘boring’, which may have contributed to the lack of focus on innovating it over the years. Ironically, shifting focus and applying technological innovations to the department can remove the repetitive tasks away from the employees, enabling them to focus on more enjoyable and challenging tasks, and ultimately reduce the risk of human error.
Applying new technologies will not only improve the day-to-day for those working within accounts receivable departments, but potentially change any negative perceptions that the wider organisation may have of the team by bringing them in line with the rest of the business. The solutions are certainly out there, and the onus sits with organisations to invest in the right technologies to make those improvements. For example, Onguard’s MatchMaker enables accounts receivable departments to automatically process up to 90% of payments and invoices, creating a faster and smarter way for payments to be reconciled.
Whilst the two departments typically work separately, there is also benefits to aligning the technology used by both the accounts payable and the accounts receivable teams. For contra accounts that both buy and sell from organisations, it can be potentially damaging to a relationship to chase an account for a much smaller amount than a large sum that is owed to that account as a supplier. Bringing both departments in line with similar technologies can create harmony and a more transparent strategy across the business moving forward.
Even before the ramifications of Covid-19, forward-thinking businesses have been gradually moving towards digitisation. Automation technologies are now crucial in today’s business world, helping to assist finance professionals in their typical working day and completing the manual tasks that traditionally required human input. Automation can also be implemented to help deal with any instances of staff turnover in accounts receivable departments, as processes can be handled by technology in the case of an employee leaving the business or when a new staff member is the learning the ropes. Automation can therefore help provide visibility and reduce costs through transparency in procedures.
Without doubt, lessons of previous recessions and times of difficulty need to be applied moving forward. Businesses need to innovate the accounts receivable department to ensure that sufficient levels of cash are in the business if another crisis strikes, along with a general move towards digitisation across all departments to ensure stability. A great place to start in the accounts receivable space is the integration of MatchMaker, taking advantage of its artificial intelligence and machine learning capabilities to create automation processes for incoming payments. By adopting further automation technologies across the business, organisations are more prepared for any hurdles that may materialise in the future.
This was also published by Finance Digest.