Five Keys to Managing AR Risk in an Uncertain Economy

Nicole Dwyer
Managing accounts receivable risk

Where Are We Today?

We’re halfway through 2021, and some regions are exploring post-pandemic policies. There’s still not a clear path to full economic recovery, and many of the changes and temporary “fixes” we implemented in 2020 are starting to look permanent. As a finance leader, how do you successfully manage your business and mitigate risk in a world that is still stabilizing?

There Are Several Challenges You're Navigating Right Now

  • As some businesses reopen offices, there are new office policies and procedures that must be observed. And these have both a physical and financial impact on the business. You also have team members who are quite comfortable in their work-from-home situation, and have no desire to return to the office, regardless of the new security measures in place. 
  • Processes for collecting payments and managing cash flow have changed to accommodate remote teams. As these new options become permanent, finance leaders must look at ensuring that they have efficient and cost-effective methods in place for generating cash flow.
  • Changes in processes mean there are changes in your business health metrics. Your cash flow, your DSO, your aging invoices – to name a few. All these metrics may have new baselines now that we've made adjustments for a completely new way of conducting business.
  • New patterns in your customers’ businesses mean new expectations in how you conduct business together. If your customers have had to change the way they are making money, collecting money, and managing their cash flow, it could have a significant and permanent impact on your business projections.

That's A Lot Of Change To Manage. And That's Only In Your Business

When we pull back and look at the bigger picture, there’s the added stress of potential interest rate hikes. Inflation has seen its largest increase since 1981, and this has some inside and outside of the Federal Reserve nervous. While the Fed has consistently said it’s taking a long-term view at a gradual recovery, if inflation continues to rise, especially at this accelerated rate, the Fed may be forced to act. And a slow-down of the economy overall impacts your business just as it impacts all your customers. 

Today, smart finance leaders are turning to smarter AR practices to ensure that their business is fortified to manage however the future unfolds. By implementing a smart AR platform that automates processes and helps AR teams stay focused on high value activities, CFOs and heads of finance improve the health and stability of their own business, even in a volatile market.

There Are Five Key Ways To Create Tighter Controls And More Stability For Your Business

  1. Any time, anywhere access to customer data is critical for today’s AR teams. The distributed work environment that the pandemic created is not going to go away and investing in a cloud-based platform that provides a ‘single source of truth’ is critical to keeping teams connected to the information they need to manage their day-to-day tasks. A smart AR platform like YayPay is also going to offer the automated tools and processes your team needs to be at their most productive, no matter where they are.
  2. Automated collections communications and payment processes. An automated collections process ensures that communications and reminders go out on a regular, timely basis. This minimizes the risk of non-payments and late payments, as your customers will have frequent reminders to manage their account, with easy and direct access to take care of the payment online. The flow from collections notice to submitting payment is efficient and painless. In addition, having an automated collections program to manage the daily collections process frees up the time of your collections team to focus on relationship-building conversations with your customers, as well as higher value revenue generating activities.
  3. Predictive analytics. You are already collecting a lot of information about your customers, their buying habits, and their payment patterns. By leveraging predictive analytics, you can use that data to better understand how they engage with your business, and accurately monitor when their business is hitting a high stride and when it might be sliding into a slump. This information, based on historical data, helps you better manage the account and take proactive steps to protect your business. Using predictive analytics, you can better forecast your customer’s business health as well as your own.
  4. Online payment processing. The pandemic made traditional payment processing difficult. The entire process of manually handling checks, deposits, and even visiting the bank, was disrupted, causing late payments and frustration for AR teams. With online payment processing, managing payments is faster, simpler, and more secure. Providing multiple online payment options also ensures a lower rate of late or missed payments as customers have a variety of ways to meet their obligation. And in today’s pandemic climate, online payment options are expected by your customers.
  5. Metrics for business health. Business has changed. And in adapting to the new economic situation, our metrics for success have also changed. Having the data available to understand the shifts in your business, and to start measuring new key performance indicators (KPIs), is critical to staying on top of an ever-shifting environment. A smart AR platform will provide you with custom reporting modules so you can measure and manage the data that is most important to your success.

We're still wrestling with the pandemic and its impact. And this past year has proven that to be a strong finance leader, you must pay attention to many aspects of the broader economy, just as much as you do the day-to-day decisions you face within your business. While the future remains uncertain, by investing in a smart AR platform that helps you automate key processes like collections and payments, leverage data for predictive analytics and intelligent reporting, and implement online payment processing for a healthier cash flow, you will put your AR team and your business in the strongest possible position to tackle challenges and build for the future.

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