Improving working capital seems to be a primary focus for corporations. Building a process to ensure more cash is coming into the business rather than going out, has a direct impact on the sustainability and success of the organization. A high number of companies fail because they were not mindful of tracking their revenues and expenses. A business can have a solid product or service but if solid financial processes are not in place, the business can evaporate. Automating the Account Receivables processes is one building block to improve cash flow.
In general, the Account Receivable process consists of the following key components:
Document
Develop a process to record the sales incurred
Produce
Monitor
Automate
Most business must follow these steps to determine if they are winning or losing the battle of maintaining positive cash flow. The steps outlined above are key, however it is important to remember that any financial process has many moving parts. Whether the company is a large multi-state utility or a county electric coop with only a few hundred consumers, these steps must be followed in building an Account Receivable process.
Currently, most financial professionals continue to identify a number of pain points in processing Account Receivables. The top pain points are indicated below:
In view of this, there are opportunities to build a process to improve working capital.An effective process will include the following three steps:
Evaluate
Go Digital
Expand
Although, the points above focus on addressing the gaps with the Accounts Receivable process, it is just one side of improving cash flow. Before improving any process, an organization must evaluate their current environment.Once changes are implemented they can determine whether the change led to success or had no impact.
The current process can include building a baseline of the current environment. Here are a few points to consider:
How does this compare to the organizations in my peer group?
There are a number of ways a company can initiate a process to improve cash flow. For example, EBPP is one way to accomplish it. Companies that have employed an EBPP solution have improved margins and increased customer collection rates resulting in creating a positive cash flow.Automating the online bill payment and presentment can accelerate the posting of customer payments, accelerate DSO and reduce the posting of errors.
However, improving the Account Receivable posting is only one side of the equation. Consumer’s preference is causing more and more companies to evaluate their process and begin explore processes to capture additional digital payments.