The Future-Forward Approach to Improving Cash Flow and Business Sustainability 

What would it mean for your cash flow and access to working capital if you were paid 10 days faster? Your accounts receivable (AR) processes may hold the answer.

The 2024 Payment Practices Barometer survey by Atradius reveals that Australian businesses, working with rising interest rates, are relying more and more on trade credit to source materials and services and payment trends are stretching way past 30 days.

In the same survey, 67% reported they’d implemented some form of AR automation in 2024. However, there's still work to be done – the average Days Sales Outstanding (DSO) for Australian B2B companies was 56.4 days, significantly higher than the global average of 49 days.

The real impact of AR challenges

Efficient AR processes are vital for maintaining healthy cash flow and business operations, much like a circulatory system. Blockages can disrupt cash flow, increase costs, and impact key business functions.  

Ask yourself:

• Are you consistently hitting your cash flow targets?
• How much time does your team spend on manual AR tasks?
• What percentage of your receivables are consistently paid on time?

Let's dive into the top 10 challenges and their technology-based solutions:

1. High Days Sales Outstanding (DSO)

Challenge: According to specialist advisory McGrathNicol, 2024 research into 124 ASX-listed companies showed DSO, Days Inventory Outstanding (DIO) and Days Payable Outstanding (DPO) growing steadily over earlier years. Extended payment and credit cycles tie up working capital and restrict growth opportunities.

Solution: Implement dynamic dashboards that track DSO in real-time. Create your own automated payment reminder workflows that adjust based on customer payment history and risk profiles.

2. Invoice accuracy and dispute management

Challenge: Manual errors in invoicing can delay payments drastically and lead to unwanted breaches in customer relationships.

Solution: Deploy automated validation checks and standardised invoice templates. Create a centralised dispute resolution platform where issues can be tracked and resolved systematically. This policy approach typically reduces dispute resolution time and preserves good customer relations.

3. Cash application complexity

Challenge: Matching payments to invoices becomes increasingly complex with multiple payment methods and remittance formats. If you’re spending too much time on misaligned data and complex reconciliations, AR automation can provide massive time savings.

Solution: Implement AI-powered cash application systems that can automatically match payments across various formats and channels. With timely and accurate matching, customers are more satisfied, and staff can be deployed for higher level tasks.

4. Credit risk management

Challenge: Traditional credit assessment methods often fail to capture real-time changes in customer financial health, leading to increased bad debt exposure. The Federal Government’s Payment Times Report Register confirms this upward extension to late payments through to June 2024, with 24% of payments taking 31-60 days while 7.3% extend to 60 days or more.

Solution: Make the most of predictive analytics and real-time credit monitoring systems. Integration with external data sources can provide early warning signals of customer financial stress, allowing you to proactively manage your credit risk and your important relationships with customers. It’s not just a job for the finance department – integrate policies and the processes that support these to supply transparent information to other departments like sales and production.

5. Process visibility

Challenge: Siloed systems and disconnected processes make it difficult to gain a complete view of AR performance and bottlenecks, and how any issues affect performance in other corporate departments. KPMG’s recent annual survey of 250 companies revealedthat only 25% would describe their corporate services as ‘highly connected’.

Solution: A unified AR dashboard that provides real-time visibility and meaningful application to all departments and includes the entire AR process, from order generation to cash flow and credit management.

6. Customer communication

Challenge: Generic, untimely payment reminders often fail to drive action. Many late payments are attributed to depersonalised communication techniques that leave the customer feeling unseen.

Solution: Create personalised, automated communication workflows and policies that adapt to customer behaviour and preferences. Include clear payment instructions and multiple payment options.

7. Resource allocation

Challenge: AR teams tend to spend the majority of their time on manual, repetitive tasks instead of strategic activities. Not only is this a huge consumer of staff time and wages, but these tasks can also leave staff unmotivated – leading to retention and recruitment issues.

Solution: Automate routine tasks like reminder generation, payment matching, and reporting. This frees up your team to focus on relationship management and complex issue resolution, learning new skills that benefit both the company and their own career potential.

8. Compliance and reporting

Challenge: Meeting regulatory requirements while maintaining efficient processes can be challenging, especially for businesses operating across multiple jurisdictions. In a rapidly shifting global finance ecosystem, maintaining local compliance is highly complex, and there can be major ramifications for how businesses maintain compliance with local authorities.

Solution: Implement compliance-aware automation that ensures all processes and communications adhere to relevant regulations in multiple operations, states or countries while maintaining detailed audit trails.

9. Payment options

Challenge: Limited payment options can delay collections and frustrate customers. Deloitte’s 2024 survey confirms the significant climb in demand for multiple digital options across the board, from retail consumers to large B2B transactions. More than 17 types of payment options are now available to most consumers.

Solution: Offer a diverse range of payment methods, including digital wallets, direct debit, and real-time payments through the New Payments Platform (NPP) as well as the full range of B2C methods that can be applied to your business.

10. Technology integration

Challenge: Legacy systems often create data silos and prevent end-to-end process automation. Consider every part of the finance cycle, from inputs like paper-based sales orders and invoicing to receiving cheques, and any of the manual accounting processes, reconciliations and audits that accommodate these.

Solution: Adopt modern AR platforms that offer robust integration capabilities and APIs to connect with existing systems.

Moving forward

The future of AR management lies in intelligent automation and data-driven decision-making. By addressing these challenges head-on, you can:

• Reduce DSO
• Decrease operating costs
• Improve customer satisfaction scores
• Free up working capital for strategic investments
• Turn the finance department into a strategic powerhouse, working alongside other corporate services.
  
  

Ready to transform your AR processes? We’d welcome the opportunity to discuss how FUJIFILM Business Innovation Australia’s expertise and leading-edge solutions can help you overcome these challenges and accelerate your business growth.

Talk to our experts today to learn how to harness the power of hyperautomation. Visit www.fujifilm.com/fbau or call 13 14 12.