09/30/2021
4 REASONS WHY YOUR
ACCOUNTS RECEIVABLE IS A PROBLEM
Everyone seems to have a good story or excuse when it comes to collecting the money owed to
your company. Donβt fall victim to these popular accounts receivable management myths.
Reason #1: MY ACCOUNTING SYSTEM HAS EVERYTHING I NEED FOR ACCOUNTS RECEIVABLE
MANAGEMENT
While your accounting system might have an accounts receivable module, they notoriously lack
the functionality, control, insight, and automation required to support the accounts receivable
management process. Most systems simply were not built for accounts receivable management;
some of the major issues with managing A/R in your module include their inability to handle
disputes and dispute resolution, the need for additional dependent modules, the lack of
sophisticated reporting, the need for outside applications and spreadsheets to fill functional gaps,
their inability to automatically update account information, and extreme process and workflow
inefficiencies.
Many experts in the field of credit collections are of the opinion that most systems are unable to
support the invoice-to-cash workflow and meet the needs of an accounts receivable professional
for fast and effective collections. Industry analysts PayStream Advisors agree that βERP
(accounting systems) solutions are woefully inadequate in terms of receivables and collections
management (RCM) functionality.β
Reason #2: MY COMPANY DOES NOT HAVE A PROBLEM WITH COLLECTIONS
If you offer credit terms, then you probably have an accounts receivable collections problem, and
you donβt even realize the negative impact that itβs having on your bottom line and your cash
flow.
Most companies sell on 30-day credit terms, but if you analyze your average days-to-pay (ADP)
or days sales outstanding (DSO) youβll probably be shocked to find that customers are taking a
lot longer to pay their bills. In fact, most companies take between 45-60 days to collect on
invoices. By developing accounts receivable KPIβs you can keep an eye on your accounts
receivable performance and give yourself insight into potential problems before they become a
reality. When was the last time you sat down and analyzed your accounts receivable
performance?
Commented [MJ1]:
Reason #3: ACCOUNTS RECEIVABLE MANAGEMENT IS EASY
Managing accounts receivable is much more than sending out an invoice and recording payment.
For each invoice a company sends out collectors must work through a long list of activities
including invoice creation, delivery, confirming receipt, generating, and analyzing aging reports,
sending reminder letters, sending past due notices, calling customers, scheduling calls, taking
notes on accounts, recording payment, settling disputes, and so much more. Accounts receivable
is truly a huge job and its critical to a companyβs cash flow, but many do not have the
resources or the time to manage collections proactively, efficiently, and effectively.
Accounts receivable management software can help collectors automate their most time
consuming and repetitive tasks so they can focus on collecting invoices, not updating
spreadsheets or hunting through emails for information.
Reason #4: WEβRE NOT THE PROBLEM, ITβS OUR CUSTOMERS
Your customers know they have to pay you and a majority of them want to pay you on time but
most of the time there is something going on behind the scenes keeping them from doing that.
You wonβt like to read thisβ¦but often the company collecting the invoice is the problem. In fact,
46% of late payments are late because of administrative errors, not a customer being unwilling or
unable to pay. Your customers have many other vendors that they deal with daily so if you are
not making it fast and easy for those to pay you, then you need to accept some of the blame.
NOTE: A simplest definition of accounts receivable is money owed to an entity by its customers. Correspondingly, the amount not yet received is credit and, of course, the
amount still owed past the due date is collections
