Our seven-step approach for an effective accounts receivable process

Although it's easy to think of cash collection as an external problem – the company versus a world of late paying customers – a backlog of receivables is typically the result of internal processes that need to be optimized. The good news is determining the optimal approach to prevent bad debts, reduce billing errors, improve collections approaches and minimize payment disputes is much more within an organization's control than demanding a customer to pay on time. A thorough examination of the entire customer-to-cash process can lead not just to a one-time recovery of a delinquent receivables but to lasting gains for the company in cash-flow acceleration, cost improvement, debt reduction and customer satisfaction: a treasure within.

Reducing the level of accounts receivable requires an end-to-end evaluation not only of collections practices, but of all of the processes within the revenue cycle that ultimately result in the state of accounts receivable balances, starting with sales and ending with cash application. Only after the company has developed a thorough understanding of how and when cash flows from the customer into the organization can a structure be designed to best optimize those flows.

Most often the solution isn't simply to add additional FTEs or implement new software. Although dedicated personnel and premier systems and tools can enhance the process, there is no substitute for world-class best practices, organizational structure and strategy. This is the most effective approach to make the long-lasting improvements in receivables that a company needs to both survive a downturn and to optimize cash on hand and minimize reliance on debt during optimal economic conditions.

Our seven-step approach takes a holistic view of the accounts receivable process:

Revenue Cycle Strategy

Our approach to world-class customer-to-cash optimization addresses common challenges that clients face within the revenue cycle and provides proven practices to improve cash, cost and service levels.

Examples of key performance indicators and other metrics used by organizations to determine the health of their customer-to-cash processes:

Headline Indicators:
  • Days sales outstanding (DSO)
  • Best possible days sales outstanding (BPDSO)
  • Accounts receivable aging balance
  • Collections effectiveness index (CEI)
Sample Operational Metrics:
  • Bad debt/write-off expenses
  • Order errors
  • Billing cycle time
  • Cash target
  • Dispute volume & value by reason
  • Days billing outstanding
  • Weighted average terms (WAT)
  • Weighted average days to pay (WADTP)
  • Weighted average days unbilled
  • Cash application cycle time

Research Downloads

Optimising Unbilled Receivables

Some of the least productive moments in business are the days or weeks between the moment a company has incurred costs and the point when it can pass those costs on to a customer. This gap, the unbilled receivable, adds cost and risk to the company without contributing any positive value.

Buried Treasure

Uncover cash from your accounts receivable process, prevent bad debts, reduce billing errors, and minimize payment disputes.

Dynamic Credit Risk Management: Key Enabler of Profitable Sales

The underlying philosophy of the credit department is always to set the right balance between minimizing bad debt losses and enabling profitable sales. A dynamic credit risk management is key to solve this problem. Find out more about dynamic credit risk management, definition, key components, how to implement and manage such program.

Maximizing Your Customer Profitability

Understanding your customer profitability and differentiating and aligning your organization strategy, processes and services can maximize the profitability of all relationships, and in turn, maximize overall profit.

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Contact us today for a complimentary working capital analysis of your accounts payable process and take the first step toward releasing more cash from your operations.

Call 1 866 442 2538 to speak with a representative.