Finding Time for Finding Money

Your accounts receivable (AR) staffis always pressed for time. But what is taking up all theirtime? Collections of course. The unplanned hours your staff spendstrying to resolve disputes and collect customer payments. For AR, collectingcash, the life blood of a company, is paramount. These critical ARcollections activities fuel operations, but unfortunately they detract fromrather than create new company value.

Justlike the rest of us, AR is being pushed to do more with less. Theconsequence is little or no time is left for AR to work on improvingcollections and predictability of cash flow. What if your AR staff couldfind time to get ahead of delinquencies and proactively address collectionissues before they occur? What if they could find time to analyze paymentterms impact on days sales outstanding to guide sales? What if AR couldpredict payment patterns and cash flow to keep treasury informed? AR wouldincrease cash flow, which means money.


YourAR team can create value if they find the time. But guess where AR isspending their time? Globys continuously talks with and surveys customersand other accounts receivable professionals to collect data on how ARdepartments spend their time and what their challenges are. Here is thebreakdown in terms of most to least amount of time spent:

1. Inquiries/disputes
2.  Following-up on status
3.  Dunning
4.  Cash application
5.  Uploading invoices into customer portals
6.  Customizing invoices for customers
7.  Cash-flow Analysis
8.  Advising other departments


Automatingthose activities and shifting AR time to analysis and advising is how you findtime. In fact, a PwC report indicated that while scale and complexitydrives up cost of finance within billing and collections, top financeorganizations have 40% lower costs and spend 20% more time on analysis comparedto data gathering. In other words, top finance organizations are spendingmore time on value creation compared to their competition.

Asimple ratio helps track where a company spends time especially relative to itspeers. If the company has two AR professionals that collectively spendninety percent a week on collections and ten on analysis and advising, theirvalue creation to collections activities ratio would be 0.11 (i.e.,10/90). In the most recent Globys benchmarks, the median AR departmentsare in the range 0.1 (9% on analysis) to 0.2 (17% on analysis) for the valuecreation ratio.

Wheredoes your AR department stand? What is the ratio of time your ARdepartment spends on collections versus improvingcollections?  Knowing where you are is step one. Step two ismaking a goal to improve. Step three is getting there.

Thefact is accounts receivable can have a big impact on company performance whenit shapes decisions on credit and payment terms using data andanalysis. Accounts receivable can have a big impact on company performanceby predicting cash flow and guiding cash management decisions.


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