Many companies hesitate to upgrade or change their Accounts Receivable System simply because they feel they can continue to achieve the same results using the same systems and processes as they did five years ago. If you are a smaller company just looking to send a few automated dunning letters and have your AR team identify which invoices are past due, there may be no reason to change. But if your company wants to improve free cash flow and cash conversion cycles, you must be sure your AR system is driving efficiencies in your processes - if you hope to grow without spending significant dollars on headcount.

In today's collections environment understanding your customer data is one of the most critical elements in your collections process. If you can't identify customer payment trends or tendencies, it makes it nearly impossible to predict company cash flow. “Cash is King” which all Controllers and CFOs would agree that if you don't have enough operating cash flow, you can’t grow your business and you can't really measure the success of your company. If your current AR system does not have this DATA readily available at the click of a button, you are behind the times and driving inefficiencies. Here are five examples of inefficiencies that should lead you to re-analyze your current AR system and decide whether it is time for an upgrade.

1. More Than 1 Hour Required To Generate Reports

If your AD HOC reports take you more than 1 hour to prepare for management. Today’s premier AR systems have the ability to sort existing customer data and provide essential reporting in a matter of seconds. I see too many managers spending multiple days to prepare an important report for upper management that could easily be prepared quickly and accurately with a better AR Tool. This is not an efficient use of a managers time, which is probably already stretched to the point of frustration. These types of specialized reports only take managers away from managing their teams, so it is important that these reports are readily available.

2. AR System Can’t Identify Non-Paying Customers

If your AR system can not easily identify why your customers are not paying you, it is time to re-evaluate if your current system is the right one for you. This is critical information for the business to improve your internal processes, to reduce delays long term, and get your customers to pay you sooner and ultimately reduce your DSO.

3. AR System Cannot Provide Estimated Payment Times

If your AR system can not provide you quickly additional expected payments over a period of time (monthly/ quarterly). This is a common ask from Controllers and CFOs, especially at the end of the quarter or month to help predict cash flow and progress towards cash targets. If your system is not up to date, often what happens is managers then need to reach out individually to each collector to get updates on promise to pay dates and reasons for delays to provide any accurate information back to upper management. This project could take days to get this information, when again this information could be provided in a matter of seconds. Some collections systems can even use customers historical payment data and trends and predict payment dates based on how they have paid you in the past. This allows collections teams to be more efficient to help them prioritize and really focus on who they need to follow up with for payment and identifying high risk customers.

4. Cannot Provide Strategic and One Time Dunning Campaigns

If your company only has the ability to run a dunning campaign based on the number of days past due, and does not allow you to target specific customers types including by region, invoice amount, new customers or high/low risk customers, it may be time to look for a new AR System. Automated Dunning Campaigns targeting specific customer types are critical to allow the collections team to focus on more complicated and time consuming customer issues, while still increasing your cash flow. Many companies need a one time dunning campaign to target a specific customer type. For example, you may want to run a campaign that targets customers who pay by check to help move them over to ACH for faster payments. If your system can’t provide that, you are behind the times in your collections processes and hurting your potential cash flow..

5. Cannot Identify High Risk Past Due Accounts Quickly

If your current AR Tool does not allow your collections team to identify certain high risk past due accounts quickly, it may be time for a new AR Tool. Some collectors have a hard time identifying what they should focus on a daily, weekly, or even on a monthly basis. Most premier AR Tools allow management to help prioritize collection accounts for their collectors daily and assign specific tasks and work-lists to their collectors. This is critical in helping to drive desired performance from your collections teams to achieve your best results.

Conclusion: Spend Less Time Reporting, More Time Generating Cash

If your collections department is spending endless hours preparing manual reports, you are only hurting your company cash flow. I think all managers would agree that they would rather have their collectors focus on collections rather than endless manual reporting. By upgrading your AR systems, your cash flow improvement will be significant enough to allow you to plan for growth and save significant dollars on headcount.