7 Signs of You Have an Accounts Receivable Problem

accounts receivableEvery year, companies around the world write off millions of dollars of both B2C and B2B bad debt. But in these tough economic times, ensuring cash flow and an optimized Account Receivable (AR) process is the lifeline of any business. Getting paid on time is key—and when you don’t, then getting AR right is more important than ever.

If you see any of these signs in your Accounts Receivable department, there just may be a problem that needs addressing:

  1. Your DSO is High or Constantly in Flux: Days Sales Outstanding (DSO) is the bellwether metric for any AR organization. When it is high, that means you are probably in the habit of extending credit to clients, which is a risk. Also, high DSO negatively impacts cash flow. If it continues to creep up, there is less of a chance you will eventually collect on those overdue accounts.

  1. Lots of Disputes & Resolutions: Whenever the accounts receivable process is manual-intensive, the end result is human error. Receivables processing continues to be burdened with inaccurate and incomplete information, which requires human intervention to sort out inconsistencies. These disputes take a further toll, as there are multiple calls from frustrated clients to the corporate receivables department.
  1. Too Much Wasted Time Chasing the Wrong Accounts: Understanding which accounts will self-cure and which ones have no intention of ever paying means that companies can increase their collection yields. It becomes easier to apply resources, time and effort based on risk profiles to prioritize and pursue the accounts where the return is the greatest.
  1. Terrible Customer Experiences: Collections can be a balancing act. It’s important to foster customer goodwill and loyalty as much as it is essential to get paid. Too often there are stories of a heavy-handed approach on a low-risk account, damaging the customer experience. However, by creating varying collection treatments with the right tone and approach, and speaking to clients as early as possible, companies can create more customer-friendly strategies.
  1. There is No Visibility: For many organizations, the AR department can be rife with manual, paper-based work. There may not be the technology or processes in place to know how much is overdue, who isn’t paying and the track record of those late-paying clients. The bottom line? If you cannot get accurate reports, there is a problem. If you can’t see if a collection call has already been made and by whom, there is a problem.
  1. You are Sending Everything to a Third-Party Collections Company: If you are way too friendly with a third party collections company, there’s a big problem. It’s a sign that you do not have a system in place to catch and reverse late payments of 30+, 60+ or 90+ days. It also means you are paying big fees and usually only getting pennies on the dollar.
  1. Your Staff is Always Busy, But Not Productive: You have hard-working people on your staff, but AR still isn’t seeing signs of improvement? That is a sure sign that you need better automation and smarter, more streamlined processes that ensure people aren’t wadding through mountains of disorganized data, inaccurate reports or killing time rekeying data, correlating data or correcting data.

To learn more about how Sutherland can help improve your AR function, and to arrange an assessment of your current practices and processes with one of our finance experts, schedule an appointment today.

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Sutherland Editorial Team (386 Posts)

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