How To Speed Up Cash Inflow With Robust A/R Automation

The world is rapidly discarding traditional tools and approaches to doing business and is turning to modern tools for assistance. If you are still stuck in the old ways of carrying out business through papers, it is high time you start making the change.

 

The world is turning paperless and, for good reasons, supporting this mass shift of behavior. Paperless technologies and business habits are more efficient, advanced, and elevated than any other traditional methods. AI technologies and digitalization are changing the face of working habits, and you can be a part of it too. Only 7% of companies don’t use AI but are looking into it.

In this article, we will look through how cash flow can be increased with the aid of a robust A/R automation system.

 

Use key metrics to supervise your accounts

One of the biggest tools that the A/R automation system offers to its user is key metrics. Numerous key metrics can help you with stirring your business in the right direction.

 

Key metrics such as days sales outstanding, the ratio of accounts receivable turnover, and aging are all important metrics that you can make use of. With these metrics, you can predict possible issues with cash flow and other such problems.

 

With such predictions, you can increase the cash flow by averting issues, write off debts, diminish the use of credit lines, and so on. With all these in action, you get the ultimate reward — happy and content customers.

 

Assess your accounts with analytics

A/R automation system comes with high-end analytical tools that can be of immense value to you and your business. You can segment and categorize your customers under different categories so that you can plan strategies accordingly.

 

The analytical tool can help you determine which customer falls under which category and will help you form the right strategies. There are different types of customers that you can assess, and here are the three most common types:

 

• Poor accounts

These customers hold the highest risk factor as they are not in such a strong financial position. You need to recognize them early on and keep a tab on them. It is advised that you take polite and considerate measures and strategies against them.

 

• Fair accounts

These customers are in better financial standing than the high-risk customers. Mild approaches and strategies are more than enough for funds recovery.

 

• Good accounts

These customers are ideal customers with a strong financial situation. For these types of customers, there is hardly any need for follow-up actions and such.

 

Understanding and recognizing the different kinds of customers early on will give you plenty of time to come up with strategies and plans so that you are successfully able to recover payments and increase cash flows.

 

Also read: The Need for Cash Flow Forecasting in business

 

Introduce improvised payment terms

While doing business, you will always come across customers who carry heavy payment risks. You cannot avoid these customers, and neither can you get rid of the risk.

 

In such a case, all you can do is reduce the risk to a minimum. You can do that by trying to introduce new payment terms with the help of your A/R automation systems that can help you achieve your goals.

 

Incentives and small discounts are a great method to get your customers to make an early payment, thus reducing payment risks.

 

Another way of avoiding risks is to introduce short-term relief programs against quick payments. This is a good way to recover payment from customers who have temporary financial instability.

 

However, for customers with high payment risks, you need to come up with proper recovery plans to minimize risks and recover payments.