9 ways Managed AR services help businesses navigate economic volatility
Managed services providers are ready to revolutionize the Accounts Receivable (AR) function.
With economic disruptions and staff retention challenges on the horizon, it is high time for businesses to look beyond the walls for solutions that streamline the AR management process and liberate working capital from your receivables ledger.
Here are nine ways Managed AR services can help:
1. Reduce DSO immediately
Combining advanced technology and financing, Managed AR providers drive down days sales outstanding (DSO) by ensuring that suppliers get paid fast—regardless of the invoice due date or delays in customer payments.
Impact: A healthy cash flow that can be used to finance operations and business growth.
2. Ensure cash flow certainty
An economic downturn may lead to bad debts, creating a cash crunch for suppliers. With a non-recourse agreement, the Managed AR provider takes on the payment default risk, ensuring that cash keeps flowing even during tough economic times.
Impact: Improved cash forecasting, allowing CFOs to spend with confidence.
3. Extend payment terms
Due to disruptions such as inflation, supply chain issues, and geopolitical tensions, customers may press for longer payment terms. Managed AR providers are able to fund the difference between invoice payment and customer remittance, and employ a collection process to ensure timely payment. Some even absorb bad debts.
Impact: Suppliers can provide extended payment terms to customers without jeopardizing their cash flow.
4. Enhance customer experience
Customers expect to receive invoices and pay bills in their preferred method. Some even demand self-service options and invoice details at their fingertips. Managed AR allows suppliers to upload invoices into any platform in their customer’s preferred format and customers to remit payment in their preferred method.
Impact: A digitized, streamlined, and transparent process that enhances customer experience.
5. Reduce overhead
The Managed AR provider takes on the burden of processing and applying for payments, as well as collecting due receivables. Shifting manual and time-consuming tasks to the provider helps AR departments save time and reduce the cost of cash applications, credit insurance, software license fees, maintenance, and IT infrastructure.
Impact: AR departments receive payment from a single source rather than multiple customers, saving time and associated costs.
6. Accelerate digitization
Managed AR providers give businesses access to advanced technologies like artificial intelligence and machine learning that they may not have access to otherwise. These technologies allow for automation of processes and provide visibility of operations and cash flow.
Impact: Frictions that slow down cash flow across the AR lifecycle are eliminated.
7. Improve visibility
Digitally connected Accounts Payable (AP) and AR systems of record provide enhanced visibility, allowing suppliers and their customers to seamlessly exchange data and payments, access invoice and payment statuses, research historical data, and resolve any exceptions online.
Impact: Digital connectivity allows both suppliers and customers to manage their accounts seamlessly from end to end.
8. Provide additional resources and staff
Acting as an extension of a company’s team, Managed AR providers help businesses manage their labor costs effectively, especially during the challenging labor market. AR providers also take on the responsibility of training existing staff.
Impact: Managed AR providers take over labor-intensive tasks, allowing in-house staff to focus on more strategic work.
9. Enable greater scalability
The economy and business needs are constantly changing. With Managed AR, businesses can scale their operations up or down quickly and with minimal costs. The providers will take care of staff headcounts and any associated expenses.
Impact: With Managed AR, businesses are always prepared for any eventualities, making them more agile and resilient.
To dive deeper into the topic of Managed AR, read the Institute of Finance & Management’s (IOFM) report, Stay One Step Ahead: How Accounts Receivable Can Help the Business Navigate Tough Economic Times.