The Inevitable Risk Of Not Using Software For Accounts Receivable Collections
AR COLLECTIONS PROCESS
Software automations have achieved prominent role in improving corporate financial management since the turn of the millennium. Modern business owners increasingly entrust software to manage their order to cash (OTC) process and accounts receivable (AR) functions, replacing the costly manual methods of the past. By adopting software, businesses ensure the harmonious flow of payments and improve their financial visibility, control, and supply chain efficiency. Despite the numerous benefits, there are significant risks associated with not using software for AR collections.
Without software in place, Manual Collection Efforts Slow Down Accounts Receivable Process
When not automating the AR collection process with OTC software, companies are often left to rely on manual methods to have their receivables paid in full and on time. This reliance on manual methods can mean waiting days or even weeks to connect with customers. Once contact has been established, manual methods create difficult conditions when it comes to investigating and ameliorating customer discrepancies and analyzing payment patterns. Such an arduous process is often too slow and labor-intensive to enable the efficient collection of cash.
Lacks Data Consolidation and Real-time Insights
A common pitfall when relying on manual processes is the lack of data consolidation and real-time insights across multiple collection points. Without consolidated view of payment data, manual collection efforts can become chaotic and lack precision. Additionally, collecting from customers, particularly those abroad, requires knowledge of sophisticated financial regulations. Manual methods are not able to anticipate, detect, and inform the company about possible legal non-compliance issues.
Substantial Increase in Cost and Inaccuracies
Manual collection entails substantial additional expenses, from costs of interviewing staff or recruiting external agencies, to the cost of accounting errors associated with manual data entry. Such errors can easily arise due to multit isking pressures and long work hours. Inaccuracies in such manual system can delay finance close cycles, leading to hidden risk of potential fraud.
Limited Visibility into Payment Activities
Without software in place, businesses are unable to secure full view of their customers? payment activities. This lack of visibility makes it especially difficult to forecast cash flows, which is crucial to assess the solvency of customer. Ultimately, without the functionality of software automations, finance departments are inhibited from increasing their efficiency, reducing their costs, and maintaining secure and consistent view of their customers.
In summary, the risks of not using software for AR collections are numerous. Companies are more susceptible to errors, inaccurate payments, limited visibility, cashflow forecasting struggles, and non-compliance risks. It is for this reason that the purchase of OTC software is seen as the natural step for businesses looking to protect their receivables and nurture healthy customer relationships.
