Adopting automated invoicing to boost cash flow in 2024
Understanding how customers engage with the end-to-end payment process can help business owners develop better policies and practices for collections.
Were payment-related delays an issue for your organisation in 2023? Unfortunately, for more than two-thirds of CEOs, the answer to that question is yes. Inflation, supply chain disruption and the spectre of recession have taken their toll on Australian businesses over the past 12 months.
Elongated collection cycles have been the inevitable result, with hard-pressed businesses pushing back on payment terms in the hope of buying a few days or weeks’ breathing space.
It’s occurring with such frequency that 77 per cent of accounts receivable teams say they’re currently behind on collections, according to the latest BlackLine research.
Things appear to be getting worse, not better as we head into 2024, with 81 per cent of organisations seeing their incidence of delayed payments rising.
Combatting cash flow crunches
Constricted cash flow can be a tricky issue to combat, with organisations very often forced to cut back on their outgoings or establish finance facilities to tide them through. In today’s times, the latter is becoming an increasingly expensive exercise, courtesy of interest rates that continue to head north.
Lack of access to cash – their own cash! – can also make it impossible for businesses to take advantage of strategic opportunities, as they present. It’s a barrier to growth at best and, at worst, can impede financial viability.
Cautionary tales abound, of enterprises that have been driven to the wall by cash flow crunches that have precluded them from paying their employees and bills.
Little surprise then that a growing number of local organisations are looking to get on the front foot, with strategies to help them sidestep customers’ stalling tactics and get the payments flowing faster.
Accessing the AR automation advantage
Enter accounts receivable automation: intelligent technology that can make the collection of payments simpler and faster, by putting paid to legacy processes and solutions for tracking debts and pursuing debtors whose accounts are overdue.
Australian organisations that have adopted AR automation slashed payment times by an average of five days, according to the latest BlackLine research.
Manual processing activity can be reduced by 50 per cent and more than twice the amount of work can be performed without new headcount.
Automating the accounts receivable function doesn’t only boost cash flow by replacing legacy manual collection methods with streamlined automated processes.
Because it provides businesses with up-to-the-minute visibility into the payment status of every customer on their books – along with a detailed picture of their payment patterns and behaviours over time – they’re able to make more informed decisions about whether and when to extend and rescind credit. That means they’re better placed to limit their losses, should a customer slide from delinquency into default.
End-to-end insight
Opportunities for potential bad debtors to slip under the radar can be further reduced, by making AR teams part of the payment journey from the very beginning, rather than them joining mid-way through when the bills come due.
Adopting electronic invoicing can allow AR personnel to see exactly when invoices were raised and emailed and, crucially, whether and when those emails were opened.
Customers’ interactions with creditors at this stage in the payment cycle can provide valuable insight into how they’re likely to behave at crunch time, ie. when the bills come due.
Those who ignore messages for several days are very often just as slow to settle their debts and frequently require multiple prompts to do so.
Knowledge is power and having that end-to-end visibility can enable your AR team to develop proactive strategies to manage these potential laggards before, not after, they fall into significant arrears.
Switching out the standard series of reminder emails for a phone call shortly after their invoice goes overdue, for example, may shorten what could otherwise be a protracted collection exercise.
Pursuing profitability in 2024
It’s often said that ‘cash is king’; an old truism that resonates even more strongly when times are tough. Embracing end-to-end automation in the accounts receivable department is an effective means of improving cash flow and reducing the risk of bad debts – both urgent imperatives for Australian businesses going into 2024. If you’re serious about putting your enterprise on a stronger financial footing in the new year, it’s an investment that will undoubtedly pay off in spades.
Rosie Cairnes, Regional Vice President ANZ, BlackLine
