The secret sauce: 3 ways to boost efficiency with AR and collections

Eugene Vyborov

Back office functions get a bad rep. They do not enjoy the same amount of attention and investment as sales or R&D – primarily because they do not drive top-line growth in any obvious way. That dynamic is unfortunate, because any company would be crippled without behind-the-scenes tasks like client onboarding, billing, and collections.

One of the side effects of the relative invisibility of the back office functions is that they are often the last ones to get the benefit of process improvement and automation. If you are looking to boost efficiency, a hard look at your AR and collections management can become your secret sauce. These two functional areas offer great opportunities to create improvement and savings quickly. Here are 3 ideas to get you started.

1. Build effective workflows.

As any other repetitive activity, receivable and collections management relies on workflows. That is where things get interesting, because not all workflows have been created equal. Some have been designed with strategic goals and modern technology in mind. Others are legacy processes that have not been refreshed in decades. As you review the workflows within your own back office, keep in mind that an optimal process should help streamline decisions, focus efforts, and educate and manage staff.

Specific areas that require a thorough review include:
• Policies and procedures for extending credit;
• Billing practices, including frequency and communication;
• Cash application procedures; and,
Collections management, including analysis, prioritization and follow-through.

There is a common misconception that standard workflows (or automation) results in forcing all employees and clients to conform to a single way of doing things. In reality, nothing prevents you from customizing workflows to respect the uniqueness of your clients! Our YayPay platform was developed to adapt to your needs and make your workflows better without breaking them. We recommend that you look for deep customization capabilities in any automated solution you consider.

2. Track what matters most.

Your company is probably already working with a set of KPIs to track performance. To maximize the benefits of a KPI analysis, take a fresh look at the metrics you are using, as well as your analysis process. Here are some key questions to consider.

• Is your team looking at the right key performance indicators?

There are dozens of metrics available for tracking, some more useful than others. If your analytics include ratios that aren’t actionable or informative, consider replacing them with more relevant metrics. A litmus test for the degree of usefulness of any metric is whether your staff actually uses it to make decisions, prioritize actions, or identify patterns. If a ratio is not being actively used, it is just cluttering your spreadsheet.

• Are you using the right baselines?

Most companies use a combination of an internal baseline (i.e. comparing your company’s performance across time) and external baselines (i.e. comparing your company to other companies). Make sure that the baselines you have selected remain relevant as your company grows! Keep in mind that one-off events can skew the metrics in a way that does not represent true trends. Instruct your staff to identify unusual events and pull their impact out of the calculations to keep your baseline “clean”.

• How transparent and effective is your goal-setting process?

In a perfect world, your receivables and collections team should be an active contributor to establishing KPI goals – along with your sales team. Many companies opt for the easy “hand-it-down-from-the-top” approach to setting annual sales and collections goals. Unfortunately, that shortcut does not win you the buy-in from your staff. Involve them in setting targets, and you are likely to see greater effort.

Once you have selected the right KPIs and goals, build a process to make regular review easy. If it takes your team 2 weeks to pull the data and calculate the ratios, your entire company is 2 weeks behind on decision-making and taking action. Real-time reporting capabilities, combined with an ability to drill down into the metrics to see the underlying performance drivers, are critical to effective triage and strategic management.

3. Keep your team focused and efficient.

No matter how great your workflows or how relevant your KPIs, all efforts fall apart if they are not supported by your staff. Getting their buy-in on goals is the starting point, but giving them the tools and resources to do their job efficiently is just as critical. Be sure that your technology arms them with an actionable dashboard that helps prioritize efforts based on real-time information. Technology should also facilitate collaboration and clear communication: no more wondering whether the sales team made that call to the client.

Your secret sauce: boosting efficiency with AR and collections
Among the many decisions required to grow a thriving company, investment in back office functions may not be the obvious choice. However, by creating the right workflows, tracking and measuring improvements, and empowering staff to do their best, companies can boost efficiency and create an unexpected advantage. If your receivables and collections teams are still following a legacy process that is a source of frustration, give YayPay a call. The right technology can make a difference!

Eugene Vyborov
About the Author

Eugene is the CTO and co-founder of YayPay, specializing in building enterprise applications for the financial industry. He is responsible for YayPay’s product delivery, strategic technology vision, and core product architecture. Previously, Eugene has founded two technology businesses, A2A and WebiNerds, and was Lead Technical Associate at TechStars Boston in 2016. He has a master’s degree in Computer Science from Dnipro National University, Ukraine.

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