How can we leverage on technology to improve collections of Accounts Receivables?
By Nithea Nadarajah
An efficient Accounts Receivable (AR) system can ensure increased cash flow for working capital purposes which is crucial for business sustainability. Vice versa, unpaid debts can create negative cash flow impacts. However, businesses can sometimes be so focused on making sales that the importance of a proper functioning AR system is somewhat neglected.
According to an Edge report in August 2017, RAM Credit Information Sdn Bhd (RAM CI) stated that in the second quarter of 2017, average debt collection days increased to a period of 70 days although most companies grant credit terms in the range of 30 days only. “People generally only pay those who remind them or chase them. That is the psychology of the debtor,” observed Mr. Keshmahinder Singh, Founder, President and CEO of Kollect Systems Sdn Bhd, a leading technology provider of Revenue & Arrears Collections, Debt Recovery and Agency Management Software Solutions at the recent MIA AccTech 2018 breakout session on automating Accounts Receivables.
This shouldn’t be the case anymore as technological advancements have disrupted business operations, including current AR systems. However, many businesses are still behind the curve in automating AR systems e.g. the traditional aging report is still the primary tool used to determine overdue invoices. Think of the opportunity costs squandered when staff spends time managing aging portfolios and matching payments received to outstanding invoices instead of focusing on value-added services and optimising business productivity.
Keshmahinder advised businesses to augment their current AR systems by leveraging on tools such as Artificial Intelligence (AI) driven solutions. AI-driven intelligent applications are capable of interacting with existing business operational systems to simplify and automate certain AR processes. For example, there are applications that can swiftly process large volumes of data into suitable information used to automatically generate reminders via Short Messaging Service (SMS) or Electronic Mails (emails) prior to generating e-Statements. Most importantly, remittance data relating to debt settlements can be extracted, processed and reconciled with corresponding invoices and simultaneously outstanding debts can be negated from the system. Achieve better cash forecasting by extracting existing customers’ historical and external data to generate predictable outcomes in relation to debt settlements. Revolutionise customer service management by better managing disputes, putting in place a transparent workflow to handle complaints, analyse symptoms and track resolutions.
By using web-based applications for AR systems, business and accountants can do the following:
Revenue Collections Management
- Generate and assign a Dynamic Worklist
- Manage SMSs, emails, Calls, Notices, etc.
- Use an Adaptive Scoring Engine to monitor Collections Risk, Behaviour, Profile, etc.
- Profiling and Segmentation of revenue
- Unified Collections of multi-products or multi host systems
- Online Performance Monitoring of Collectors / Teams
- Reports on Collections
Debt Recovery Management
- Charge-off or write-off debt
- Restructure and reschedule debt
- Legal Management (where the software can behave like an Internal Legal department)
- Collateral Asset Disposal / Foreclosure Management
- Write-off & Full Settlement Management using a Financial Ledger processing engine
- Distressed Asset Management Company Automation
- Reports on Recovery
- Design and schedule reports
- Create reports in multi-format (xls, pdf, xml, etc.)
- Distribute reports via email
- Provide comprehensive Charting and visual depiction tools
As augmented AR systems become more structured and methodical, business can gain tremendous opportunities to harness competitive advantage, especially in terms of improved customer relationships and improved cash flows. So do explore how to automate your AR function to achieve greater efficiencies and scale your business to a higher level.