OPINIONSHADOWBOXERWhy investing in Accounts Receivableis essential for survival.AUTHOR – Andy LilleyHISTORICALLY, accountsreceivable (AR) has beenthe victim of a seriouslack of investment from atechnological perspective.Primarily, this lack of investmenthas been the result of something simple: aserious misunderstanding.AR is largely in the shadows, regarded as anecessary but transactional back-office functionand not something that creates ‘value-add’ forthe business. Unlike the core accounting ofbookkeeping, AR’s reputation is that of a kindof conveyor belt. Necessary, but low impact inthe grand scheme of things. As a result, AR isthe victim of fundamental misunderstandingsregarding how it can be optimised – and thebusiness impact that the right optimization canhave.When finance professionals think about howto streamline or optimise AR, typically it hasbeen viewed as something that may be betteroffshored or that the ERP already handles.This is due to it being largely manual, timeconsuming and often transactional. But thissimply moves the problem elsewhere, ratherthan solving the underlying issue.Investing in technology that automates theaccounts receivable function on the other handgrants you complete visibility over the flow ofcash into your business, in real time. The data,intelligence and real-time oversight of workingcapital that optimised AR offers to businessesare invaluable, for several key reasons, which Iwill outline below.WORKING CAPITALApplying customer payments to customeraccounts quickly and accurately is the cornerstoneof successful AR. However, manual processeslead to significant delays in unlockingcrucial cashflow.Money owed by customers is one of thelargest assets on any balance sheet. A recentreport by PwC estimated that the amount ofworking capital held hostage in this way at anenormous €1.2trn globally. According to PwC,releasing this cash would be enough for globalcompanies to boost their capital investment by55 percent, without the need to look externallyfor funding or put their cashflow underunnecessary pressure. With interest rates as theyare right now – never mind what might be on thehorizon – looking internally to find opportunitiesInvesting intechnology thatautomates theaccounts receivablefunction on the otherhand grants youcomplete visibilityover the flow of cashinto your business, inreal time.to streamline cashflow and payment processesis a no brainer.Let me give you an example: on average,organisations are paid on day 50-55. For abusiness with $500m revenue, each day is worth$2m. By automating and optimising paymentprocesses, businesses can potentially release asignificant amount of cash into the bottom line,with certainty that can then be put to work inthe business.Releasing cash from receivables is thequickest and cheapest way to more workingcapital, yet organisations continue to rely onmanual processes which don’t provide propervisibility and tie up cash for far longer thannecessary. Investing in AR frees up moreworking capital, which means stronger businessresilience and enables more effective decisionmaking. Put simply, it puts much more powerin your hands and leaves much less up toguesswork.CUSTOMER RELATIONSHIPSCredit controllers used to be much morepersistent. This was clear in the terminologythey used. They looked at customers as ‘debtors’.This sounds more akin to something you’d readin a Dickens novel than the way a businessrefers to its trusted partners.The way you treat your customers not onlyreflects your efficiency internally, but cruciallyshapes perceptions, both for potential newcustomers, and those who might be on the fenceabout jumping ship. Chasing a customer for apayment that was made days before, simplybecause you’re reliant on manual processes thatdon’t give you proper visibility, could reflectpoorly on your organisation. Aside from thewasted time and effort, receiving an erroneousdemand for payment on a bad day could be thedifference between a continued relationshipand a swift parting of ways.Customers provide the value for ourorganisations. It’s our customers that aregoing to support us through the tough times.A mindset shift is required here at all levelsof business, including the C-suite. Customersshould be treated with the same respect whenthey owe money as when they don’t. Investing inAR creates the visibility over customer paymentbehaviours that is essential to this.The right solution can unlock decisionintelligence by removing time-consuming anderror-prone processes involved in preparing,Brave | Curious | Resilient / www.cicm.com / July & August 2022 / PAGE 12
OPINIONAUTHOR – Andy LilleyInvestment is nolonger a nice-to-have,it is now a must-havefor survivalBrave | Curious | Resilient / www.cicm.com / July & August 2022 / PAGE 13continues on page 14 >
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