It’s no great insight that many businesses are having a tough time right now. What may be surprising is the impact on accounts receivable that has resulted due to COVID-19. An estimated 209% rise in overdue invoices has been calculated since the start of the pandemic.
Even in good times it’s important to maintain consistent cashflow and avoid wasting time chasing money, especially for smaller businesses. What we learned after the 2008 crash is that when a recession comes around, getting paid on time is more crucial than ever.
With increasing Coronavirus restrictions on the economy and companies, strict credit control can make the difference between a business surviving or sinking. Here’s what we suggest to reduce your days sales outstanding (dso) in a recession.
Accounts Receivable (or credit control as it’s often referred to) involves getting customers to pay for your goods or services in a timely fashion. It sounds so simple.
In a perfect world everyone would pay exactly when they’re supposed to. You’d never have to spend a minute chasing or managing relationships with customers’ accounts departments. But if 2020 has taught us anything it’s that we don’t live in a perfect world.
In reality, our customers often have the same kind of cashflow problems as us. It’s often a juggle between ensuring smooth relationships and putting pressure on to be paid what you’re owed when it’s due.
We believe that automating your accounts receivable process is the best way to stop your days sales outstanding building up. Here’s how:
Nearly everyone has at least one or two bad payers: extreme, one-off red flags that you’re not likely to risk doing business with again, or just regular customers who are notorious late payers. Regardless of the state of the business relationship, their overdue invoices are costing you money.
A 2018 survey of SMEs showed that 68% reported negative effects of delayed payments. These included relying on bank overdrafts and even holding off paying their own suppliers. 78% of SMEs said they were forced to wait a month or longer past agreed payment terms for their invoices to be paid.
Such liabilities can be deadly in a recession, but they can all be swept away by good automated chasing software.
On average our customers report getting paid 16 days sooner using Chaser’s accounts receivable automation. Reducing those days sales outstanding can make a big difference to cashflow: about $20,000 extra for every $500,000 of turnover.
Any accounts team will tell you that they have to spend too much time and effort on invoice chasing. Nobody wants to be asking for money all day – especially when those funds should already have been paid. It’s a time-consuming, labour-intensive process that could be better spent elsewhere.
An automated credit control system puts a huge chunk of administrative time back into your employees’ hands. Many of our users have said that they save 15+ hours of work every week by letting the email chasing software do the digital drudge work.
That’s the equivalent a whole day’s office time that could be reallocated to doing the accounts, creating new business, or firefighting the real problems the pandemic has brought up.
If you’re an SME, every hour is precious. By sending timely, personalised chasing emails, automated credit control will take a weight off your mind and put time back in your diary.
There’s a fine balance to be reached when chasing overdue invoices: weighing the urgency of the business’s cashflow needs with the soft skills of diplomacy. This polite persistence can be a difficult act.
A chaser email that reads as if written by a computer isn’t going to have the desired effect. People will hit delete as quickly as they would on any piece of spam mail.
That’s why Chaser’s automated credit control process has personalisation built into its DNA. The way a business handles difficult situations (like chasing overdue cash) can define their relationships with their customers.
With Chaser, senders’ email addresses and signatures are maintained, and the accounts team can tailor precise characteristics for a given customer.
You can therefore ensure your emails come across as if you’ve written and sent them yourself, not via a machine. This human element makes all the difference between a message being received and understood, instead of being ignored.
Through advanced cloud-based software, Chaser provides its users with email templates, sending schedules and accounts system integration. These elements combine to ensure that all invoice chasing emails are appropriate in tone, timescale and only when a debtor’s invoice is still due.
Our tried and tested templates contain the ideal wording to elicit the desired response in their recipients, depending on the stage of the debtor process. They’re also customisable, so they look like they were typed by you for each specific client.
If, say, you’ve got a relatively casual relationship with a customer, that needs to be reflected in your correspondence. With Chaser that tone of voice can be tailored in all credit control emails the automation sends.
Our automation software will never send chase emails for unpaid invoices in the middle of the night, on bank holidays or at other bizarre times – unless you want it to! The custom schedule features allow you to choose precisely when the chaser emails will go out.
The system is able to consult with the information in your accounting system to check whether an invoice has been paid. If it has, the automation knows not to send another chaser – saving your customers from further unnecessary hassle and sparing any additional friction.
Chasing invoices manually is a thing of the past. In uncertain periods of recession it’s vital that customers pay as close to the agreed terms as possible, while ensuring smooth relationships that make your business work.
Now is a good time to automate your accounts receivable process and get your business’s days sales outstanding down to a minimum. Click here to read more about our services.