Reasons For A Failing Ar Strategy

 The best Accounts Receivables Strategy involves tracking of open receivables before they become delinquent and cause severe cash flow problems. So, if your organization is facing cash flow issues, you know your AR strategy is either falling short or failing. So proper steps need to be taken, however, before you start to solve this issue, you need to understand what and where things are going wrong.

Below are some key reasons for a failing AR Strategy:

1. LACK OF STANDARDISED PROCESSES:

Lack of a formal, watertight, and standardised AR Management Plan is a guarantee of ineffectiveness. The effectiveness is further compromised by tedious and mundane manual processes; random follow-ups, addressing ad hoc issues and then desperately trying to connect the various dots to pinpoint the issue. This, instead of pinpointing the issue, actually results in a lack of clarity and a complete defocus from the major objective.

The correct approach is to immediately, and on priority, list down all the major nodes in the process along with all the possible roadblocks. And secondly, put in place a Dispute Management Process. The point is that you need to put a system in place and make all the efforts to ensure that it is implemented and ensure that the policies and procedures are effectively carried out by also putting in place a tracking mechanism that measures milestones and achievements at regular intervals. Doing all this will definitely lead to reduction in time & effort, and of course Cash Flow.

2. LACK OF OWNERSHIP OF THE AR PROCESS:

Ownership points to the importance and the significance of having a Credit Policy in place with a clear mention of the person or persons responsible for every aspect. This also puts in a implementation roadmap of best practices. Further, within the AR Process, there has to be clearly designated roles for different phases/ stages of the AR Process. These clearly designated roles make people accountable for any breach in the SLA, or, even for disputes, or any other slack that might creep into the process. Here too, the starting point should be the identification of the key nodes, followed by assigning accountability for each node so that, through tracking, you can discover and sensitize the laggards and/ or reward the achievers.

3. YOUR STAFF IS UNDERTRAINED IN DOMAIN EXPERTISE:

Many businesses, particularly SMBs, entrust office managers or part-time clerks with the task of collecting debt because they lack a dedicated AR Management Team. And so, it’s crucial that the personnel possess the skills, have the resources, and are trained to make a positive impact during every customer interaction regarding collections. Here the use of technology and AR Automation can really make that required impact. It will help reduce your dependency on manpower by automating many of the sub-processes, such as email reminders, invoice submissions etc. Moreover, it will encourage you to hire better resources as the overall headcount will go down.

4. LACK OF MANPOWER:

The quantity of invoices that your company generates can be overwhelming. This can lead to missed follow-ups, forgotten invoice submissions, and an increasing unresolved dispute count.

Original Source: https://inebura.com/blog/reasons-for-a-failing-ar-strategy

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