We live in the fast-paced digital marketplace where account receivable or AR teams are continually facing wide array of challenges that are impacting company’s growth and overall cash flow. Even if you have an optimal rhythm regarding taking precautions and using specific automation practices, it is vital to understand the challenges that can be significant.

The most common account receivable challenges are ledger disorganization, high DSO, inadequate policies and lousy communication. Therefore, you can streamline various processes, choosing paperless options, provide multiple payment options, automate AR and update customer information, which will help you deal with them.

Still, when you have a structured credit policy, you can easily identify with specific customers that will offer you a peace of mind. However, regarding inefficient management of accounts receivable, you may end up with severe issues along the way, such as:

• Incorrect payment relocation
• Mistakes on invoices and bills
• Writing off outstanding receivables as bad debt
• Missed overdue invoices and follow-ups

As a result, you will end up with lack of cash flow, which will directly slow down your production and operations. The organization may miss revenue targets, which means you will stay behind competitors and deal with issues of potentially losing customers. The main idea is to identify the issues and overcome them afterward.

In further article, we will talk about common challenges you may experience as well as potential solutions you can implement to ensure the best course of action. That way, you can strengthen your working capital. Let us start from the beginning.

The Most Common Account Receivable Challenges

1.    Slow Payment

You should remember that timely AR processing and payments are essential for surviving in harsh marketplace, especially if you depend on digital landscape. AR teams must close the gap between the invoicing and collection schedule so they can optimize cash flow and provide you with revenue you need to take your business to the next level.

However, in some cases, the cycle may run slowly due to heavy manual operation your team must make to prevent potential mistakes. Remember that managing checks and PDF invoices is labor-intensive and requires plenty of time, which will ultimately decrease your overall productivity.

Even if you take advantage of lockbox system, you will lose time on collection, of course, depending on whether a customer pays on time.

By entering here, you will learn more about account receivable. These waiting times can easily strain your company’s budget and cash flow, which means you are less likely to keep up with invoices and grow.

2.    Reconciling and Tracking Payments

Another important factor, which is crucial aspect of AR process is reconciling and tracking payments. The moment you lose a track of a specific payment, you will end up with inaccurate records, which may lead to missed or double payment. Therefore, you will end up with cash flow issues and potential collection delays, among other things.

At the same time, manually reconciling payments is time-consuming, especially since your team must match payments to invoices, which is prone to errors. If you continually depend on invoice payments, your team must handle each one separately and by using a complete focus while inputting numbers and identifications.

Tips for Dealing with Challenges

1.    Digital Payment Methods

The simplest way to increase collections and reduce delinquency is to ensure the fast and simple payment processes. We recommend you to offer a range of digital payment options including ACH transfers, debit cards and credit cards, which can streamline the process.

It means your team will speed up the AR process by safely storing the payment data on platform, which is effective way to reduce the potential issues from happening. You can ask for convenience fee for credit card transactions and allow bank-to-bank zero-fee transfers, which will encourage ACH payments and reduce overall expenses.

The proper payment option will allow you to deal with hidden expenses, while customers are more likely to choose you for seamless payments that will last a few minutes.

2.    Reduce DSO

The essential step is reducing your DSO, which will help you streamline the strategy. At the same time, you can set up a debt collection strategy, which will ensure every invoice gets sent with transparent terms as soon as possible. Check out this website: https://cgfsaccountsreceivablebranch.state.gov/ to learn more about account receivable.

You can deliver invoices digitally, which is another important consideration. Implementing electronic invoicing will boost collections and billing. At the same time, you can speed up the process by setting up recurring payments and autopay. A study has shown that you are more likely to get paid on time by offering others a few payments methods.

That way, you will increase chances of someone becoming your repeat customers, which is vital to remember. We recommend you to encourage customers to pay early and offer incentives, while impose penalties for late payments. For instance, you can offer a specific discount for people that decide to pay in the first ten days.