Top Three AR Strategies to Navigate Today’s Covid-19 Environment

Nicole Dwyer

Does today’s Covid-19 health crisis mean you need to change your AR strategies?

Yes. And no. 

In a recent Paystream survey, pre-coronavirus, the numbers looked like this:

  • 87% reported that reducing DSO was their most important challenge.
  • 86% said doing more with their existing staff was a top priority and challenge.
  • 84% noted that reducing portfolio risk was a critical challenge.

Considering how much things have changed in just a few short weeks, as we analyze what these changes mean to businesses, we conclude that the top three are still the top three - but now in reverse order. 

Strategy 1: Evaluate your risk management processes

With the market contracting and businesses scrambling to adjust to changing behaviors, we’re all concerned about business continuity. For ourselves and our customers. If you don’t already have tight risk management operations in place, this is a critical time to evaluate your processes and implement some changes to help you manage today and thrive tomorrow.

  • Credit management: if you don’t have a tight credit management process, put one in place. You may have new applications coming in, looking for credit during these constraining times. You may have current customers looking to extend their credit lines with you. While certainly it’s important to be empathetic and supportive of our customers and partners during this time, it’s also important to put measures in place that ensure business continuity as we move into a new normal. To mitigate your risk, re-visit the tools you use for pre-screening clients, including credit reports, financial statements, and reference checks. Evaluate which tools are working for you, and which ones are not. Make changes to ensure you’re making the smartest decisions possible for your business.
  • Collections management: this is key to a healthy cash flow. Improving collections effectiveness with smart tools will help you minimize the risk of late payments, even in today’s unpredictable market. If you don’t currently have a centralized system and a unified collections workflow, now is the time to establish one - and one that is managed and accessible across multiple - AR, collections and sales - no matter where they are working from these days. Keep your process simple, and ensure you communicate it clearly to both your teams and to your customers. If you’re offering more flexibility or initiating other changes to your process during this time, like expanded payment options or payment plans, then communication is key to ensuring customers are responsive and you are able to forecast your cash flow.

Strategy 2: Use automation to help your teams work more efficiently. 

Your team will thank you. Given the remote-working status of many companies, a cloud-based AR solution that automates many of the important but repetitive processes that AR teams manage daily has a positive impact on cost savings as well as employee satisfaction. Look for automation in these areas: 

  • Invoice management: several aspects of invoice generation and delivery can be automated and free up your team’s time for more strategic activities. Look for an AR platform that allows you to automates tasks like:
    • The creation of invoices, pulling data from multiple sources
    • The delivery of invoices through email, online portals and even postal mail
    • Payment reminders via email, online portals and postal mail
    • Payment acceptance through multiple channels, such as ACH/EFT, wire and credit cards
  • Cash application: a typically highly manual process, automating aspects of cash application can ensure cash is flowing through your business more quickly. In cash strapped times, this can help make the difference between paying your own bills and meeting payroll. Smart automation tools can:
    • Prioritize emails so you focus on which ones require urgent attention
    • Capture and translate information via AI (artificial intelligence)
    • Accurately match invoices to payments 
    • Automate postings
    • Support the dispute and collections process 
    • Feed cash application data back to your ERP system

Strategy 3: Reduce DSO with smart AR tools

There are plenty of reasons customers are late with payments and impact your days sales outstanding (DSO). In today’s unstable climate, we have yet another one. To minimize the impact on your business today, and ensure you are poised for growth as we shift into the “new normal”, leveraging smart AR tools to coordinate a seamless process benefits you and your customers. What makes up a smart AR solution?

  • Cloud-based tools: your team needs to be able to access information and manage AR processes from wherever they are sitting these days - their home office, their kitchen counter, their backyard. And your customers need to do the same - they are now trying to manage their business in this new social-distancing environment, just like you are. A cloud-based solution ensures that everyone is able to access data and keep business moving forward regardless of physical restrictions.
  • Machine-learning automation tools: machine learning isn’t just about automating a process. It automates and learns as the process is repeated. Machine learning means our technology gets smarter and faster at handling the process it's tasked with. For example, a machine learning algorithm deployed in the dispute resolution process can look at the body of a dispute message, understand it and consider the following factors to make a decision on the priority of this dispute:
  1. What is being disputed
  2. What is the severity of a dispute
  3. What is the value of a customer to a company (based on the amount of business and open balance of a customer)
  4. What is a credit score of a customer

The algorithm uses all those factors to understand how urgently this dispute requires attention, and whether it is worth spending time on it at all. This removes the manual aspect of someone researching all this data, from different data sources and shortens the time to finding a resolution. As the tool processes more disputes, it gets smarter about which factors are most important to your business and prioritizes accordingly.

Machine learning and automation tools also exist for invoice management, the collections process, deductions management, and cash application. Leveraging these smart tools impacts your entire credit-to-cash cycle.

This unexpected pandemic is changing the way we work. It’s impacting our businesses and our customers in unforeseen ways. Responding to this crisis with a smart and thoughtful strategy, rather than giving into reactive, short-term tactics, can make the difference between your business surviving and your business thriving as we discover what the “new normal” really is for our businesses. 

If you’re not working with a smart, cloud-based solution that offers end-to-end operations support for your credit-to-cash process, talk to YayPay today. Our mission is to revolutionize the way we work - and today, the evolution is already under way.


Nicole Dwyer
About the Author

Nicole Dwyer is Chief Product Officer for YayPay, bringing more than 10 years’ experience in accounts payable and receivable technology to ensure YayPay continues to meet the needs of its customers. Having spent her entire career in commercial payments, Nicole understands high- and low-value payment systems, the complexities of how businesses pay and get paid, and has worked with distributed teams spanning the globe. She is a graduate of Worcester Polytechnic Institute. Residing in New Hampshire with her husband, daughter, and son, they spend their time outdoors and creating new adventures.

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