5 Signs It Might Be Time to Update Your Accounts Receivable Monitoring System

The effectiveness of your accounts receivable monitoring system (ARMS) is not something you should take lightly. How well you monitor incoming payments from customers can have implications for both your current operations as well as your business’s long-term growth.

Unfortunately, updates to ARMS are not always a high priority for Filipino businesses, as most will understandably focus on immediate cash flow, rather than future liquidity. That said, if you have the following issues, you may want to update your accounts receivable monitoring system:

1.) You’re having problems with collections

More consistent collections lead to a better cash flow for the business. A well-implemented ARMS could be integrated with your sales and marketing software and can be used to trigger all kinds of useful automated processes usefull for improving collection efficiency. For example, your ARMS can trigger an advance text or email to your customers to notify them of upcoming due dates or payments that are past due. These simple reminders can greatly improve payment rates and reduce delinquency.

An updated ARMS could be set up to flag key accounts so your collections team can use their time and transportation budget more effectively, potentially helping you do more with a smaller team. If you also sent automated reminder emails to customers, it will allow the collections team to focus their efforts on non-responsive customers only, which can further improve your collection efficiency.

2.) You have no idea when most of your receivables are due

Sometimes it can be hard to keep track of everything that’s going on in your business. Failing to keep up with receivables is quite common, and it can result in sending reminders too late or after their due date. This can lead to several problems, including a negative customer experience, inefficient use of collections team resources, reduced payment rates, and a slower cash flow.

Implementing an ARMS can allow your business to remedy these issues. Because these systems allow the accurate tracking your receivables, it becomes easier to make accurate periodic forecasts of the cash you can expect to receive. This allows you to better plan your business’s finances. Knowing the approximate amount of receivable cash you are likely to collect each period can also make it easier to get loans to expand your business if needed.

3.) You want to reduce customer defaults

An updated ARMS that’s linked to your sales automation software or enterprise resource planning (ERP) suite can also drastically reduce the number of customer defaults and returns. Even a simple text or email reminder a few weeks before their due date can do a lot to improve a customer’s ability to pay on time. This, in turn, can help prevent avoidable defaults or product returns, which can negatively affect both you and your customer.

4.) You want to improve your market re-targeting 

With an updated accounts receivable management system, customers on the A/R contact list can easily be targeted with exclusive promos. You can do this to help roll out new products and services or even use it to encourage prompt payment.

When linked to marketing analytics software, you can even gain insights into the behavior of different customers based on their payment history, which can allow you to offer a more tailored product or service. The best part is, you don’t have to limit yourself to contacts who still have payables. You can also look at the behavior of customers who have already finished payments and re-target them as well.

5.) You want to reduce overhead costs

Inefficient collections teams, sluggish cash flow, and high customer defaults can collectively sap at your available liquidity and make it difficult for your business to expand. By updating your ARMS even before you think you need it, you can easily pay for the initial cost of set-up through the reduction in overhead.

Having an updated ARMS that’s linked to your ERP and sales automation software can help reduce your overhead by attacking the sources of delay and inefficiency directly. Using one can dramatically reduce the manpower needed to process receivables. Instead of compiling and processing them periodically, this process can be done automatically, saving you and your team hours every week, potentially allowing you to keep your team smaller, which reduces compensation and benefits expenses. The automatic notifications allowed by an ARMS will also help increase the baseline cash inflows expected every payment period, which can further improve your liquidity and overhead.

Conclusion

If any of the issues above are relevant to you, you may want to upgrade your accounts receivable monitoring system. Using a modern system to manage your receivables can be the key to helping your business reach the next stage in its growth. Upgrading your ARMS can give a wide range of benefits that businesses of any size can enjoy. Newer systems allow for several useful advantages including better insights into customer behavior, timely reminder messages, a more agile collections team, and ultimately, the ability to have more competitive offers for your target market.