When you’re responsible for accounts receivables in a professional services business, you have a unique set of challenges to master. The nature of your business is all about the customer - identifying your customers’ needs, providing best-in-class services, building the relationship for ongoing services and then leveraging that relationship into a reputation that attracts more business.
Basically, if your customer isn’t happy, your business isn’t happy.
Why does this impact you in AR? There are three key areas that provide challenges:
- In the services world, you already start “behind the curve.” You generally incur costs from day one of the customer relationship, often days or weeks before you’ve been paid a single penny. In addition, if there are tools or products you require in order to provide your services, you are often paying for those regardless of when your client actually pays you.
When you start the relationship already behind, how do you get ahead?
- Forecasting working capital is unpredictable. In a services business, billings can be variable. Customers may use more or less of your services or staff in a given time period. If you offer fixed-priced packages, those packages may be expiring or up for renewal. You may see a spike, or a dip, in the number of customers you have in each package tier. There is often a lot more flexibility and movement in a services business’ pricing structure, which means projections are generally built on past behaviors, not today’s reality.
How do you determine your best growth strategies, or identify potential issues before they become serious hazards, when you can’t see what’s happening with your business now?
- Your business health is inextricably tied to your customers’ business health. How well your customers manage their own business has a direct impact on their ability to pay your invoices. This means if there’s a sudden change to their business - say a pandemic unexpectedly rocks the economy - you can be faced with a collections challenge on top of your billing and AR management challenges.
How do you build a defense against a pandemic - or any impact to your customer’s ability to pay?
The answer to all three of these challenges is simple: arm yourself with a smart AR platform. But let’s break that down into actionable strategies.
Strategy #1: Know your AR processes. That sounds so basic but there’s an aspect to understanding your services model that often gets overlooked. Whatever your service is, you’re the pro. You know it inside and out. But what you need to know next is not about your services, but about your business and how you manage cash flow. You need to understand what it actually costs you to onboard a new customer, what the gap is between the services you deliver and the first payment you receive, and the time in which your invoices need to be paid for you to manage a healthy cash flow. You have the data around you - amounts and dates are in your invoices. It can be a manual effort - and a headache - to pull all that together but the data is critical to understanding what parts of your AR process are working, and which require some fine-tuning.
Recommendation: implement a smart AR platform that can pull this data together from your ERP, your CRM, your financial software and other data sources, and present it in a dashboard that’s easy to read and to follow trends. This is an invaluable investment.
Strategy #2: Know what’s happening in your accounts. Lack of visibility into your customers accounts means you can’t see now how they’re using your services, and you can’t anticipate what they might need next. And it may not only be you who is lacking visibility - your customer may also be unclear on which invoices are due, when and what they should be projecting to spend next month or next quarter. When both you and your customer are scrambling to understand the paper and payment trail, it can be a frustrating experience. And it means forecasting is near impossible.
Recommendation: create transparency with a self-service portal. A smart AR platform will not only pull together customer information from your disparate sources and share it with you in a consolidated dashboard, but it can do the same for your customers. When customers can access and pay their own invoices, on their own time (not restricted to your customer service hours) the proven result is a higher rate of on-time payments - and happier customers. More on-time payments means a more regular cash flow and - voila - more predictability.
Strategy #3: Know your customers. If you’ve started to work on implementing the first two strategies, this third one becomes much easier. You’ve already taken steps to consolidate your data sources, to create dashboards that provide accurate and actionable information, and to improve customer service with a self-service portal that frees up your time as well as your customer’s time. The more you can understand your customers and their business, the better you can identify who your best customers are, who are the high risk ones, and in which customer segments do you have the most opportunity to grow your business.
Recommendation: With all this information on hand, keeping an open line of communication is key to really getting to know your customers. And to getting paid. Automate communications so your customers are clear when invoices are due, when payments are late, and what their options are. Frequent, friendly communications are shown to have a significant impact on generating on-time payments. Smart AR software will use automation to help you set up a communications cadence that keeps your customers informed, your payments on time, and your cash flow actually flowing.
In your business, the end game is all about goodwill with your customers. Their positive experience with you leads to repeat business, new customer recommendations and a strong business reputation.
With the right AR platform, you can make smarter business decisions. The data and reporting your new smart AR system provides gives context to your forecasting and helps you refine it. Access to a customer portal provides transparency and gives your customers a sense of control over their accounts. At the same time, it gives you insight into their business and control over your own. A proactive communications program minimizes errors and frustration, leading to a positive customer experience.
YayPay offers smart tools for smart AR
We simplify the AR process with one platform, one system, one code base. Our cloud-based solution utilizes advanced machine learning to drive a 3X improvement in productivity for AR teams. YayPay’s automated communication workflows allows your AR team to interact with more customers, with less effort, and focus on priority accounts that produce positive cash flow. YayPay integrates with many accounting, ERP, billing, and CRM applications, giving you a complete and accurate look into the collections process to help you better predict cash flow and increase revenue. Our proprietary predictive analytics engine identifies credit risk and reduces the potential for revenue losses, driving smart business decisions.