5 Accounts Receivable Trends for 2023
December 28, 2022
As a leading provider of accounts receivable automation software and services, we wanted to share the following important trends we see for the coming year.
Interest rates have skyrocketed from almost free to a high “new normal.” This has profound implications for businesses that borrow for working capital needs since most loans have floating rates.
Your customers are looking to optimize their cash flow and working capital, and the quickest and easiest way to do this is by adjusting their accounts payable cycles. For example, if they have been paying you in 40 days, flipping a switch to 44 instantly improves their cash position and reduces yours. Accounts receivable automation, strategies, and tactics are the best ways to combat this trend.
Many businesses – especially chain retailers – will further tighten order scrutiny, increasing deductions and chargebacks for compliance violations, shipping errors, trade promotion bill backs, etc. This impacts your cash flow and profits. Automating your accounts receivable and collection processes combats these tactics.
Advanced receivables and collection software can quickly improve your collections by automating strategies based on customer risk and histories. Software features such as autonomous dunning and robotics replace routine tasks to free up staff for more critical responsibilities. This is especially important in an environment where experienced staff is hard to find and train.
If your customers are smaller businesses, consider integrated, automated payments like credit cards and e-checks. This functionality can be incorporated directly into collection emails and will typically produce payments without telephone follow-up.
All companies are focused on better understanding their customers’ needs, requirements, and “hot buttons” to service them better. Data mining can uncover customer trends, profitability, and growth potential.
Your goal is to identify those customers that are highly profitable and pose the greatest opportunity for growth. You can get some of that data from records of daily routine customer-facing activities such as O2C.
Deduction analysis on specific customers can provide useful information such as servicing costs, profitability, and growth potential.
Credit quality is a serious consideration since many businesses face a double whammy of challenges: a large increase in loan-carrying costs, a business slowdown, and a potential recession. This requires deeper credit risk analysis than has been required in recent years. Suppliers can keep an eye on trends by looking at the pricing for Credit Default Swaps and A/R Put insurance offered by trade credit insurance providers and banks. They should also be monitoring significant downgrades of public debt by the major rating agencies.
It’s important to make it easier for companies to do business with you. Receivables teams are involved with accepting payments from customers, reminding them about due dates and credit limits, and resolving invoice disputes. Your teams must provide a good experience through all these touchpoints.
Also, your customers want to conduct more business electronically. They would prefer to access documents such as invoices, statements, and online shipping records and to make payments and dispute charges that way as well.
Suppliers that achieve this can reduce operating costs and improve customer engagement.
The days of employees handling routine tactical activity are coming to an end. Roles are quickly evolving from simply transactional functions to more strategic activities. Staff are being trained to draw upon data from numerous sources when assessing risk, identifying changing market trends or addressing operational efficiencies to improve customer services.
Organizations constantly need to invest in upscaling their staff with new skills and training to keep employees engaged and position them to take on future responsibilities. Companies need to foster an environment that reinforces continuous learning and career growth.
The one certainty in business that everyone can count on is change. Businesses must constantly look for opportunities to improve productivity, remove process blockages and waste, and better serve customers. As such, Management needs to continually promote a mindset within the organization for “What’s next?” and “How can we do this better?”
Customers expect it and reward suppliers that live it and achieve it.
Automation solutions are more easily implementable than ever, with advanced features like AI, robotics, and customizable workflows. As your company navigates these trends, remember that we can help optimize your receivables process with Carixa automation software or services.