Accurate recording keeping is a vital aspect of any businesses and nowhere is this more true that in your accounts receivable (AR) department. The beating heart of your finances, effective management of your accounts receivable is crucial to maintaining cash flow.
Good cash flow management is how businesses live or die. Cash flow problems are responsible for 82% of business failures in the United States, so making sure your accounts receivable features as few errors as possible is vital to keeping your company afloat.
Despite the importance of accurate record keeping, about 39% of invoices contain errors and 61% of late invoice payments occur because of incorrect invoices. This guide will help you avoid those mistakes and sidestep the resulting log jam in your cash flow that could put your businesses at risk.
From legal compliance and accountability to pure efficiency, read on to find out accurate record keeping can become the foundation for your business’s success.
The importance of accurate record keeping in credit management
Credit management is based on effective accurate record keeping. One of the primary mistakes made is credit management is not constantly monitoring your customer credit-worthiness, risk, and changing status.
Credit checking is a normal part of the onboarding process, but it often stops there. However, credit-worthiness changes over time in relation to a wide range of factors. Regular credit checking, combined with keeping accurate records of customer payment behavior gives businesses a critical insight into the financial status of their clients.
This insight can then be turned into actionable information that informs critical decisions such as when to extend credit, what credit terms are agreed upon, and how best to deal with customers who are having trouble settling their account.
Keeping no, or worse, inaccurate records, deprives businesses of the vital data they need to reduce risk, ensure their own fiscal security and offer their customers credit terms that best suit their individual circumstances.
Dispute resolution
In a connected benefit, accurate record keeping helps in the dispute resolution process. The details of disputes raised by customers can quickly and efficiently be checked against existing records.
Keeping accurate records also allows businesses to resolve payment disputes in a timely manner. If the information that proves a customer's dispute is unfounded is readily available, it can be quickly communicated. The quicker the dispute is resolved, the faster you get paid.
Legal compliance
Around 60% of business owners say they struggle with keeping up with compliance and regulations and the penalties for not remaining compliant can be harsh. Non-compliance costs businesses on average $4,005,116 in revenue losses, which is more than double the cost of simply remaining compliant.
When it comes to maintaining legal compliance with industry standards, it mostly boils down to keeping accurate records. The best step any AR team can take is to rigorously document every step in the debt collection process, from initial credit agreements to payment reminders.
Obviously this information will need to be stored securely, in order to remain in compliance with laws such as GDPR. However, easy access to detailed accounts of your debt collection process not only provides you with the insights noted above, but also allows you to demonstrate compliance and avoid lengthy legal disputes.
Accountability and transparency
Transparency has become an important metric by which potential customers judge a business, with those businesses. Your company’s ability to remain transparent and openly communicative during difficult interactions, such as debt collection or dispute resolution, is critical to building trust with your customers.
Transparency also has a wide range of internal benefits. Siloed businesses with poor information sharing and capabilities often have ineffective credit control processes. As detailed in the sections above, accurate records and access to customer payment data is critical to comprehensive credit control. If your departments don’t share data and maintain transparency, no one is working with a full picture.
Transparency also encourages internal accountability. Mistakes can be accurately owned and addressed, reducing interdepartmental friction and improving the overall working culture of your company.
From stagnation to efficiency: the CES story
The Community Energy Scheme (CES) is an excellent example of how taking steps to improve accountability and transparency can result in material benefits. Reliance on outdated spreadsheet-based systems within the CES has led to inconsistent record-keeping, overly complicated handovers, and a total lack of accountability.
The net result of these inefficiencies was £2 million in old debt with little chances of recovery.
Since adopting Chaser as their credit management system, CES has been better able to support their growing customer base, secure £18,000 per month in direct debit payments, and recover £800,000 of their outstanding debt.
The crux of this comprehensive turnaround in their ability to manage their accounts receivable was the implementation of Chaser’s Receivables CRM. Acting as a centralized repository for all debtor information and communications, the Chaser CRM automatically tracked and stored all interactions with debtors.
This unparalleled transparency and easy access to vital data allowed CES to streamline their credit management processes, creating greater efficiencies and giving them the ongoing cash flow they needed to grow.
Efficiency in credit management
As demonstrated by the CES case study, efficiency in credit management is critical for a number of reasons:
Firstly it lowers costs. A more efficient system means less time searching for data. Readily accessible data improves decision-making when extending credit. In short, accurate record keeping empowers your staff to do their job better and faster.
Accurate record keeping also reduces risk. With access to customer payment behavior records and up to date creditworthiness checks, staff are better able to avoid extending credit to the wrong customers. Equally, accurate record keeping reduces the risk of falling out of compliance, shielding your company from the associated penalties and lost revenue.
AR software, like Chaser, that allows you to centralize records, credit check customers, record payment behavior and automatically send payment reminders from a single platform, gives you access to all the benefits of accurate record keeping, without increasing your workload.
Utilizing Chaser for accurate record keeping
If you are looking for a way to centralize your financial records and create a more effective and efficient method of credit management, Chaser’s platform is the perfect solution.
The credit checking and payer rating system allows you to stay up to date with the financial health of your customers. This data arms empowers your receivables team to make better decisions and reduce risk. It also allows you to approach each customer as an individual, demonstrating that kind of personalization that rapidly improves potentially productive customer relationships.
Payment reminders and the payments themselves are also taken care of by the Chaser Pay and Payment Portal features. Personalized payment reminders are sent automatically and each contains a link to a Payment Portal specific to the customer, giving them an easy way to review their outstanding invoices and make a payment.
Chaser’s automated system reduces the chances of human error and ensures consistency in record keeping, helping to resolve disputes and keeping you legally compliant.
All of the information gathered through each of these interactions with your customers is stored in a central data repository, which is both secure and easy to access for authorized staff.
Instead of a hundred different spreadsheets and siloed departments, Chaser allows your entire business to work from the same blueprint, ensuring compliance, transparency, accuracy, and consistent cash flow.
Turning accurate data into unmatched growth
Accurate data is the engine that drives your business. Without accurate record keeping, your staff are unable to work to their full potential, you can’t estimate credit risk appropriately and you also risk falling out of legal compliance.
By employing Chaser as a centralized repository for all your credit management data and documents, you can turn the data you gather every day into actionable insights that benefit your business.
With its award-winning suite of automated tools, Chaser not only reduces your DSO, secures you cash flows and frees up staff from chasing overdue invoice, it also ensures accuracy and consistency.
To find out more about how Chaser can help you maintain accurate records, reduce credit risk and get paid on time, contact one of our experts to book a demo today or start your 10-day no obligation free trial.
For more helpful insights and articles from our expert credit control team, as well as a range of free tools and templates, check out the Chaser blog.
