6 Key Considerations for Scaling Accounts Receivable Management
Scaling a business comes with any number of challenges, in all parts of your operation. Everything from supply chains to human resources to product development have to be more efficient and effective to keep up with an increased demand.
This includes billing and accounts receivable management, which will be among those most impacted. A significant increase in volume will likely lead to more manual work, inaccurate invoices, revenue leakage and frustrated customers, all of which can stunt your growth or even send you backwards. How you’re set up to handle growth for the A/R function can make the difference between barely keeping billing and collections covered vs. professional accounts receivable management.
A sound strategy and understanding of potential pitfalls can help your billing and collections operations scale with revenue without missing a beat. There are several factors to consider, however, before you do that.
Is your A/R function elastic?
There will be weeks when you’re at 50 percent of your billing capacity - and there will be weeks where sales double and your process is overwhelmed. You need an accounts receivable management operation that can increase or decrease capacity depending on needs - and do so quickly.
Whether through technology or talent, you need to provide a customer experience that is consistent and accurate. Invoicing is a primary touchpoint between you and clients. Not investing in it is a missed opportunity.
Are you prepared for the future?
The invoicing process has, like most parts of business, greatly evolved as technology changes how we do almost everything. Is your A/R function ready to take advantage of the next round of changes? Is it open to changes like using AI to predict cash collections? Or is it more intransigent and tied to how things have always been done.
Not embracing the changing future very well may cost you financially or leave you less competitive in the marketplace.
Are legacy systems holding you back?
Maybe you want to embrace that new technology, but converting your old accounts receivable management workflows to a new platform is technologically impossible. Your current setup is a mishmash of legacy systems that sort of work for your current state but wouldn’t hold up under an increase in volume.
It may require acquiring new technology or talent - or developing existing talent - but it will be far more painless to do in the growth stage than during maturity.
Are you making the most of automation?
One of the most important things you can do to to keep up with an increase in billing volume is to automate what used to be done manually. Nearly every aspect of accounts receivable management, such as dunning, forecasting, payment acceptance and reporting and more, can be done with a one-time setup, potentially saving thousands of man hours and an untold amount of dollars.
At a low volume, you can still keep the personal touch that comes with billing by hand. That’s just not realistic as invoices increase. By automating certain accounts receivable management tasks, you can keep up with customer demands.
Are you reporting the right metrics?
At a low volume, it’s fine if your billing operation is tracking on the basic metrics, like days outstanding. However, a larger operation should be taking advantage of “advanced” metrics that provide a more holistic view of how your accounts receivable management function is performing .
A sophisticated approach would include reporting on metrics like:
- Sales by Item - A detailed look at what products were sold and how much
- Accounts Receivable Aging - How long have overdue accounts been so?
- Billing Communications - How many emails have been sent regarding late payments? How many phone calls or letters?
Are you able to effectively integrate new talent?
An increase in billing volume will no doubt create the need for an increase in headcount. How effective can you be at bringing new talent in, integrating them into your - changing - organization and quickly getting them up to speed?
This could be a significant amount of new faces and maintaining governance and security will be paramount.
These 6 considerations for scaling accounts receivable management aren’t the only things to think about as you set forth on your rapid growth journey, but they’re certainly among the most important for keeping pace with the overall size, speed and scale of the business. The best CFOs, accounting managers and financial operators will have answers to these questions before they’re asked by their CEOs.
Preparing for your company's next stage of growth? Get a demo of our award-winning A/R Cloud so you can scale without the fail.