Improve Cash Flow and Get Paid Faster with Accounts Receivable Management

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As costs rise across the board, consumers are increasingly struggling to pay bills on time. In the first year of the pandemic, utility debt, for example, soared from $12 billion to an estimated $32 billion by the end of 2020, according to the National Energy Assistance Directors’ Association (NEADA). Even before the pandemic, inflation and rampant supply chain issues hit, it took US businesses an average of 51 days to get paid.

Consumers will continue to face higher bills across the board and may ultimately struggle to pay car loans and mortgages as current economic factors are unrelenting. What’s more, some individuals might unwittingly be choosing the costliest ways to pay, such as via cash or check in person, which adds to their mounting fees. This leads to more days sales outstanding (DSO) and stunted cash flow.

Fortunately, there are strategies to reduce DSO and improve cash flow by promoting alternative payment options and digital channels. These include accounts receivable management and other methods we’ll get into in more detail below.

The priciest paths to payment

But first, what are the most costly and least successful ways to get paid?

According to calculations from the Bureau of Transportation Statistics, U.S. Postal Service and the Federal Reserve Bank of Kansas City, paying bills in person, no matter the payment method, is most expensive because of costs related to transportation like bus fares or gas. The second costliest payment method is mail, due to postage costs. On the other end of the spectrum, the least costly payment methods are by phone or online channels such as a website or app.

Another factor that can increase fees is waiting until the last minute to pay bills. Often, customers on the verge of paying late end up paying more for expedited payments using a third-party service. Buy Now Pay Later(BNPL) services are also increasing the number of consumers with overdue payments. A third of U.S. consumers who used BNPL last year fell behind on one or more payments, according to a Credit Karma and Qualtrics survey.

Get paid faster with accounts receivable management

Even with rising costs and cash-strapped customers, your business can encourage quicker payment in a number of ways.

One of them is by fine tuning accounts receivables management and collections using technology that fully integrates digital and print solutions across the entire collections experience. Broadly, accounts receivable management includes invoicing, collections, customer relations, tracking and evaluating payment trends and reconciling payments received. Giving your customers and collectors multiple ways to connect with and pay you is what ultimately helps you get paid faster and reduces the amount of time your staff spends on chasing payments necessary to sustain your business.

Accounts receivable offerings might range from industry-specific payment portals to self-service letter template management, but they all have the same aim: simplifying payment processing to get paid faster. The best accounts receivable management solutions are end-to-end, customized to your organization’s business rules and use automation to streamline cross-company functionality. These features help elevate communication, visibility and operating efficiency between you and your trading partners so you improve working capital, workflow management processes and relationships with your partners.

What to look for in an accounts receivable management solution

Capabilities to look for in accounts receivable management solutions include:

  • A single-access portal to help keep information centralized in one place
  • A versatile and easy user interface so that accounts receivable management is a positive experience, not a pain
  • Invoice presentment, workflow management, customer notifications and payment initiation via both offline and online means
  • Fully configurable and easy implementation so you don’t need IT or other resources to get up and running
  • Customer invoice import from any format—file, email, API or even paper—plus the ability to review, approve, dispute and adjust invoices
  • Automated data extraction, matching and consolidated view of cash application to give you a holistic view of your capital

Accounts receivable management solutions span industries like healthcare, auto finance and utilities.

Other ways to improve cash flow

Accounts receivable management is a stellar way to improve cash flow and get paid faster, but it’s not the only approach. Here are three additional ones depending on your business setup and needs:

  1. Promote scheduling options – Offering your customers a choice of one-time, recurring, AutoPay, early payment discounts and payment plans gives them the flexibility to pay how and when they want. Electronic payments can save consumers on postage costs and late fees. Bills paid automatically tend to have a lower dollar value on average than bills paid manually. You can also cut interest rates or give bonuses to consumers that sign up for auto-pay or who pay early.
  2. Offer multiple ways to pay each month – You are likely to get paid faster if you provide multiple ways to pay, which a customer can vary each month. Sixty percent of consumers want flexibility to select their payment method as a desired bill-pay feature. The key is to make it seamless for customers to toggle between all of the different payment channels, like mobile, text and live CSR, and methods like debit and credit card or Apple Pay.
  3. Send reminders across channels – Sometimes, customers simply forget to pay their bills, even if they have the bank funds to cover it. Research shows as many as a third of consumers will pay a bill after the third reminder. Using email, text, IVR and even print and mail are all channels you can use to remind customers of upcoming payments. With the right platform, you can gather insights on which communication channel individual customers most prefer and automate sending of payment reminders.

As costs rise, don’t take the heat for past-due payments. By offering your customers flexibility and choice and communicating the payment channels, methods and scheduling options available to them, you’ll collect payment faster and reduce DSO while also improving customer experience. Turn to accounts receivable management and/or the other approaches we described to improve working capital.

Editor’s Note: This post was originally published July 7, 2022 and has been completely revamped and updated for accuracy and comprehensiveness.