Stop Managing Receivables - Start Monetizing Them
Date Posted:Wed, 22nd Nov 2023
Receivables management is still considered by most as a back-office function focused on collections. Companies pour immense resources into the department – salaries, technology, and management attention. Yet the statistics reveal a grim truth: it’s a losing battle.
In the UAE, invoices now take over 100 days on average to be paid. More alarmingly, over 50% of payments are late, and the rate of uncollectible invoices has spiked 38% in just the past year, rising to a staggering 11% of all B2B invoices.
What does this mean for your bottom line? Providing the product or service and then chasing elusive payments costs a lot more than doing nothing at all; accounts receivables departments, despite the costs, are failing to bring in revenue that is rightfully yours.
The vicious cycle continues – you invest more in collections hoping for better results, take out a loan to cover the unpaid invoices for the time being, but the invoices tying up your cash continue to mount and interest payments take a toll. Eventually, the receivables are written off altogether.
Forward-thinking executives are realizing the need to reimagine receivables not as a cost center, but as an integrated profit centre aligned to corporate strategy.
What would this look like?
First, it requires structuring the receivables management team and systems to optimize cash flow and income generation, not just make collection calls. Key performance indicators would track revenue recovered and days sales outstanding reduction, not just aged account balances.
Next, it means ensuring that data and processes are implemented efficiently and accurately. In this new world of advanced analytics and AI, data is an asset and needs to be treated as such - data needs to be clean, organised, accurate, descriptive, and safe. From that starting point processes can be optimised and automated, and AI technologies which provide insights and predictions in real-time can be exploited.
More readily, partnerships open up opportunities to unlock written-off invoices and reignite lost customer relationships. Specialized third-party receivables firms possess dedicated tools and expertise recover late and written-off invoices. Rather than sinking recurring costs into an in-house department, many agencies share a small portion of your recovered revenue. In other words, you transform written-off invoices into a source of passive income.
The journey requires both mindset and operational shifts. But those who reimagine receivables management as a profit center will benefit from:
Improved cash flow, DSO, and working capital
Higher collections and lower bad debt provisioning
New revenue streams from receivables monetization
Reduced operating costs and collection expenses
Higher productivity across departments due to faster payments
By treating receivables as an asset class generating income, not just a cost center, forward-thinking companies can unleash new profits while optimizing collections. Isn’t it time to rethink receivables at your organization?
This is where RM1 and its depth of expertise can help.