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How Manual A/R Processes Hinder Working Capital, Human Capital and CX

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The triple threat position is one of the first fundamentals that a basketball coach teaches young players. With knees slightly bent, elbows hinged and the ball ready to launch in their shooting hand, players who square up against a defender in this stance are poised to quickly execute any of three offensive moves: shooting, passing or driving to the hole.

From their positions, accounts receivable (A/R) managers and their squads are similarly poised to execute three highly valuable offensive moves. They can improve working capital, notch human capital management improvements, and/or enhance the customer experience. To do so, A/R professionals need  the right coaching and tools — especially those that help them eliminate the drag of manual processing.

Manual A/R processes keep finance functions on their heels while limiting their offensive capabilities, according to TreviPay’ 2020 survey of 300 U.S.-based B2B corporate finance professionals responsible for managing one or more facets of A/R operations across most industries. In another post, I highlight survey responses related to current finance function goals and pain points. Here, I want to share results that reflect how manual processes hinder working capital, human capital and the customer experience.

Threat #1: Working Capital Management

Forty percent of finance leaders identify working capital management improvements as their top functional goal this year. Manual invoicing processes hamper progress on his objective, especially when combined with the unique billing requirements that 27% of survey respondents manage on more than half of all their accounts. Invoicing errors and resulting payment delays increase day sales outstanding: 33% of respondents report day sales outstanding (DSO) of 45 to 60 days while only 12% of respondents keep DSO below 30 days. The survey also finds that 25% of responding organizations’ receivables are written off as bad debt. Lengthy DSO and bad debt can prevent companies from qualifying for funding solutions, which is less than ideal during challenging economic stretches.

Threat #2: Human Capital

Manual A/R processes also exact a human toll. Rather than focusing on higher-value activities, A/R professionals contending with manual processing errors must spend more time scrambling to respond to customer requests, resolving disputes and working through a higher volume of collections. These issues often have a spillover effect on sales teams. According to the survey results:

  • 51% of responding organizations dedicate six to 10 employees to collections activities each week;
  • 75% of each full-time A/R employee spend 18 or more hours each week on collections;
  • 78% of respondents report that their sales team is involved in onboarding, credit limit increases, disputes and/or collections “very or somewhat often;”
  • 63% of salespeople’s time is focused on A/R activities.

Threat #3: The B2B Customer Experience

Companies drive loyalty, in large part, by meeting or exceeding customer expectations and by delivering responsive, convenient service. When outdated workflows obstruct A/R and sales teams, the customer experience suffers. The survey results show that manual (and often in-house) credit and underwriting processes can significantly delay customer onboarding: 56% of respondents indicate that it takes four or more days to onboard a new customer. Ineffective credit and underwriting processes can also delay or prevent companies from making swift credit line adjustments to top customers when certain situations arise (e.g., a surge in seasonal sales or the customer’s acquisition of a major new client).

Automation is a fundamental enabler of winning A/R. Finance and A/R leaders can get a read on the degree to which manual processes are hindering their performance by asking the following questions:

  • Is our credit application process too long?
  • Do we lose customers during onboarding?
  • Is our sales team burdened by non-sales tasks?
  • Do we have frequent billing errors?
  • Are payments often misapplied?
  • Do we frequently experience fraud?
  • Are our DSO and collections efforts increasing?

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