In the era of fake news, it’s never been more important to deal with the facts — the accounts receivable sector is no exception. 

In this article, we’re tackling a few of the top finance myths that prevent teams from doing their best work and what you can do about them.

#1 Late payments are all the customer’s fault

The unfortunate reality in accounts receivable is that customers don’t always pay their bills on time. In fact, according to recent research from PYMNTS, 93% of companies experience late payments. 

There are lots of reasons for this. A company could be going through financial distress. They could be changing banks. Or they could have simply forgotten. 

On the surface, these appear to be “customer problems”. However, the most effective accounts receivable teams review the steps they can take to support customers, simplify the process and secure on-time payments.

If a company is facing financial challenges, you may want to offer installment options, which allow them to pay down a large balance over time. Studies show that 78% of customers are more likely to bring you repeat business after a positive experience with payment plans. 

78% of customers bring repeat business after a positive experience. Who says it doesn’t pay to be nice?

 

Another effective method is an early payment discount. For example, you can offer a 2/10, net/30 discount, meaning customers receive a 2% discount if they pay within 10 days instead of 30. 

When customers “forget” to make a payment — with or without inverted commas — it’s worth reviewing your collections process. How often are you following up? Are you customizing your approach to ensure the best possible response rate? If you’re using the same approach for everyone, you won’t address the core issues in payment behavior. 

And what about the payment channels you provide? People are accustomed to real-time payments and if your process lacks these, it may stand out in the wrong way. Offering flexible options such as ACH, wire and credit card is essential to decrease friction and increase convenience. If you want to go one step further, you can provide a self-service portal that allows customers to easily access account details and make payments on their own time. This will lead to a noticeable uptick in payment reliability.

#2 AR and sales can’t be friends

Friction exists between accounts receivable and sales because each party believes the other is impacting their success. To resolve this issue, the two teams need to communicate more effectively.

In the onboarding process, accounts receivable teams must manage sales’ “need for speed”. They want requests reviewed and approved quickly in order to meet monthly quotas, but AR has a responsibility to prevent the company from working with risky customers.

AR teams need to ensure sales understand payment terms and communicate these to the customer. This increases the likelihood that customers adhere to the agreed payment schedule. It helps to remind sales that it’s in their best interest to onboard reliable companies as they may face commission being clawed back if customers do not pay.

It’s important to eliminate any obstacles that are preventing successful collaboration. If they’re using separate systems such as an ERP, CRM and spreadsheets, it’s time to make a change so that all parties can access the same information. This is particularly essential in the era of remote work.

 

Dreamy dashboard! YayPay centralizes all customer information on a cloud-based platform

 

Leveraging accounts receivable management software allows teams to pull all of their information into a centralized system. This enables them to share collection history and account notes, and easily send alerts and reminders between departments related to certain customers, credit holds or limits. The outcome? The sales process is accelerated, without raising the level of risk the company takes on.

#3 Credit management is unmanageable

Credit management is a big deal for every business. Accurately assessing the creditworthiness of customers impacts a company’s ability to collect funds and therefore directly impacts cash flow. 

Unfortunately, it’s often an incredibly lengthy process — from qualifying risk, allocating payment terms, making decisions and extending credit limits. There is also the ongoing task of monitoring active customers to make sure they are not defaulting on payments. In an unpredictable economy, this becomes far more likely.

There aren’t enough hours in the day to complete credit assessments manually

 

All these challenges can leave an accounts receivable team feeling defeated. However, there is a solution that reduces the high volume of manual tasks for finance teams and enables them to quickly and accurately assess customer creditworthiness.

“In 2022, credit management is a critical focus for all businesses. For optimum impact, firms need solutions that are simple to use and highly automated to determine the correlation between credit decisions and revenue growth.”

Kevin Permenter, Research Director, Financial Applications, IDC

With automated credit management, finance teams can grow their business’ bottom lines more strategically. Sales can be completed faster, without compromising on the quality of customers onboarded. This is achieved through:

• Customizable scorecards for every customer — an intelligent solution like YayPay pulls data from external agencies, such as Creditsafe, and combines it with payor behavior data held within the platform. This is used to generate customizable scorecards that enable finance professionals to immediately gauge customer creditworthiness. Teams can also measure a customer’s average payment time and stay alert to any changes.
  
• Instant access to information — teams benefit from 24/7 access to comprehensive, real-time data that allows them to form tailored approaches for each buyer, based on their propensity to pay. Approvals, refusals and management of credit limits can all be handled flexibly.
  
• Improved company-wide communication — credit data is stored and centralized on cloud-based dashboards that can be accessed at any time, from anywhere. This allows sales to accelerate onboarding while feeling confident about the customers they choose to work with.

#4 ERPs are all you need

Many accounting systems and ledger tools (e.g. NetSuite) offer basic invoicing features to businesses. While ERP or accounting software may have accounts receivable functionality, it doesn’t mean it has the ability to create a full-fledged accounts receivable process.

A tool such as NetSuite plays an important role in helping you store and analyze your financial data. However, it may not help drive the transformational outcomes you are looking for.

You need technology that is designed to maximize your ERP’s value. A solution that offers actionable insights and automated capabilities, enabling you to effectively leverage your data to drive improvements in efficiency and cash flow

 

YayPay works with your ERP to elevate credit-to-cash management

 

A platform like YayPay centralizes your ERP and tech stack to deliver immediate benefits. From automating routine tasks, generating real-time reports for receivables and enabling customers to access invoices and make payments, AR automation elevates your finance management to deliver bottom-line results.

No more myths

The challenges of accounts receivable aren’t going away Whether that means difficult customers, endless manual tasks or a perpetually unpredictable economy. However, the belief that you can’t mitigate the impact of these and collect cash efficiently is the biggest finance fallacy of all.