The hidden costs of accounts receivable and how you can reverse them
While there are obvious benefits to issuing your goods or services on credit customers love to buy now and pay later, you can’t escape the costs of managing accounts receivables.
Did you know it is possible to minimise the burden on your business. Here are some of the hidden costs and how accounts receivable software, ezyCollect, is designed to reduce them:
Bad debts happen. If you’re issuing goods or services on credit, there is always a chance that a percentage of your trade credit customers will fail to pay. Leading credit reporting bureau, Dun and Bradstreet, reports that the longer an invoice ages, the more likely it is to become a bad debt, with invoices over 12 months old almost always uncollectable.
Reversing bad debts
The key is to prevent invoices from ageing. Halting the ageing schedule of your invoices requires two key elements:
- Prompting overdue customers to pay via a series of reminders.
- Providing an easy way to pay you.
ezyCollect’s automation tracks every invoice in your MYOB software. When a debtor becomes overdue, their late invoices automatically enter a schedule of follow-up communications so that they predictably receive polite reminders to pay.
With ‘pay now’ buttons on invoices and reminder emails, customers have one-click access to settle their outstanding amounts online with minimum fuss.
Your trade credit customers are also your debtors. Your sales team and your accounts team will both be investing time in managing this customer group. They’re spending time issuing invoices, sending email reminders, calling overdue debtors, monitoring credit limits, reporting on ageing debtors, and reconciling payments. For most businesses, that’s hours, if not days, of laborious tasks each week.
Slashing labour costs
Automation can take the pain out of the tedious tasks involved in accounts receivable management. ezyCollect, for example, syncs with your MYOB accounting system and immediately maps all monies owing to your business, so it’s easy to pinpoint your danger zone of ageing receivables. Because reminders can be automated to be sent via email, SMS and post, staff can be hands-free in debtor management so they can be hands-on in other tasks that require their skill and attention. Used as a debtor CRM, the software becomes a common portal from which to easily export reports and share insights and information in seconds.
Often a business will take out a loan or use its overdraft facility to cover the cash flow shortfall that occurs when money is locked away in unpaid invoices. This can soon add up to a large amount of interest the business owes each month on its new debt facility. Not only is your business acting like a bank for its debtors, it’s accruing more interest payable to its own lender.
Reducing interest payable
Improving cash flow reduces a business’ reliance on a debt facility. To recover cash quicker, your business needs to drive collections systematically. ezyCollect’s software gives you the mechanism to prioritise getting paid from Day 1. Single click access to order a credit check report lets you assess customer credit risks upfront, automated reminders drive payment, and when internal efforts falter, you can click to outsource your collections to a debt collection agency – never take the foot off the collections pedal again!
To assess the potential savings in bad debt, labour and interest costs in your business, try ezyCollect’s free ROI calculator.