How effective is your accounts receivable management?
Accounts receivable management, or the process of accounting for money owed to a business, is a critical business function of any organization. In particular, growth-minded businesses need an efficient, optimized AR strategy to ensure maximum reliable cash flow. With a robust accounts receivable system in place, you can minimize financial risk and scale your business. But AR management isn’t easy.
Manually managing client communications and credit collections is a tedious job that requires proactivity, transparency, and lots of bandwidth. Not to mention manual management of your accounts receivable is not the most effective method. Conducive to human error and increasing the risk of bad debt, manual AR management can not only envelope the bandwidth of your team but also negatively impact your bottom line.
Across the board, businesses are looking for accounts receivable automation to minimize financial risk and increase cash flow. Let’s break down the top industries investing in accounts receivable automation–and why.
Top Industries Leveraging Accounts Receivable Automation
Industries with high days sales outstanding are most vulnerable to cash flow inconsistencies and bad debt. Days sales outstanding, or the average number of days it takes a business to receive payment, varies greatly by industry, business function, and customer profile. The bigger your DSO number, the more likely you are to end up with bad debt and cash flow problems.
In times of economic turmoil, this becomes even more important.
Manufacturing, Materials, and Construction
Manufacturing, materials, and construction businesses constantly battle supply chain issues and labor shortages, which can significantly impact cash flow. The construction industry has been hit especially hard in recent years with an average DSO of 83 days. Generally speaking, businesses aim for a DSO below 45. The construction industry’s DSO is almost double that.
Construction businesses simply cannot afford to lose out on profit margins and revenue due to inefficiency, preventable error, and resource constraints. Manufacturing, materials, and construction businesses are investing in accounts receivable automation to transform their internal operations and minimize any risk. In fact, we’ve helped manufacturing businesses double their revenue growth while saving millions in operating costs.
Energy & Transportation
In recent years, energy and transportation businesses have dealt with macroeconomic challenges, such as consumer debt and rising costs, that have substantially shortened profit margins. Additionally, the average DSO for these industries is 48 days, three days higher than the benchmark.
Now more than ever, these vital businesses need a highly efficient accounting solution that can minimize DSO and ensure consistent maximum cash flow.
Supply chain, weather, and global tensions have all caused an uptick in DSO in the agricultural industry. Most agricultural businesses are seasonal, meaning much of their profits come through the door 1-2 quarters of the year. Because of this, any increase in DSO or payment delinquencies can substantially hurt productivity. Without consistent cash flow, agricultural businesses may not have the resources to gear up for the next season.
Time and resource constraints have led many agricultural businesses to invest in accounts receivable automation to drive a more reliable revenue stream.
Professional services businesses are often at the mercy of their clients–and their clients’ budgets.
Because the nature of professional services is often to help businesses grow, clients may be dealing with cash flow issues of their own. With automated AR, professional services firms can reduce operational costs and increase resources. By freeing up team members’ time spent on accounts receivable management, the team can spend more “face time” (billing hours) with clients, thereby optimizing productivity and increasing profit margins.
All Businesses Need AR Automation
With a configurable automated accounts receivable solution, any business can ensure more consistent cash flow and bridge internal efficiency gaps. As inflation and other economic factors continue to create more obstacles for business owners, more businesses are looking to automated solutions for some of their more complex business problems. CreditPoint’s automated AR software increases productivity and profitability, but can also:
- Improve Your Customer Experience
- Increase Transparency & Data Security
- Inform Future Credit Decisioning with Business Intelligence Analytics
If you’re ready to take control of your accounts receivable and help your business thrive despite market challenges, schedule a consultation with CreditPoint Software to learn how you can leverage the efficiency and risk-reduction benefits of an optimized software solution.