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How to improve cash flow | Credit control & debt recovery software

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How to improve cash flow | Credit control & debt recovery software

In a previous blog we discussed the importance of accurate cash flow management, in this blog our valued partner Orbis Software highlights how credit control automation can help generate consistent and accurate cash flow.

Good credit control and debt recovery procedures are essential to successful cash flow management within an organisation. Credit control teams work tirelessly to ensure that credit control procedures are in place to guarantee consistent cash flow and keep the cost of debt collection down.

When a credit control and debt recovery policy is in place, employees and customers know the ins and outs of how you conduct business along with the detailed procedures when setting credit limits for new clients.

The key point to highlight within a business’s credit control system is the entrusting of procedures and tasks to people. Where there is human interaction, there is a risk. People inevitably make mistakes. They may become ill, take holidays and can leave the organisation. This means that a business can become vulnerable to costly errors and delays surrounding employee driven activities.

Most companies have suffered from the inevitable cash flow problems caused by bad debtors. One of the main causes of this is the lack of enforcement with regards to the terms of trade for customers.  For example, valuable employee time is spent sourcing a credit rating and credit references which are then entered into your sales ledger within your accounting system. The customer starts trading with you and over time spends more with you every month. As time goes on the customer has built a trading history with you and an element of mutual trust has grown. Consequently, it becomes easier to relax trading terms and provide some leniency with their payment cycles. This is when your business is most at risk.

Late payments impact cash flow

Late payers can harm a company’s cash flow. In order to protect your business from risk, credit control procedures need to be tightened with clear terms and conditions and improved invoicing and payment collection processes.

Invoicing and debt recovery is another time-consuming process which can further put your business at risk. For example, a typical SME with one employee chasing aged debtors will spend approximately 1,728 hours per year to carry out this task. Credit control automation can reduce this time consuming and costly process by 75%.

Credit control automation reduces risk and cuts debtor repayment cycles

Automating your credit control processes reduces the risk of potential cash flow pitfalls by providing company credit report automation, credit limit notifications and credit limit approval workflow automation. Having the ability to achieve accurate, timely debt consolidation and automatically notify associated personnel of impending and important dates significantly improves cash flow and tightens control over credit limits and overdue invoices. Automation removes the need for employees to operate the accounting system allowing them to concentrate on other pressing requirements.

Automation doesn’t just benefit your organisation, it will also assist your customers. They will be kept informed of their financial status and can be given priority over other suppliers with poor credit scores. Tightening invoicing and debt recovery processes through automation helps your customers realise that you expect to be paid within the terms and conditions agreed when the trading relationship was established. Organisations that have implemented credit control automation claim that debt management or repayment cycles have reduced by at least two weeks and the costs associated with this activity have been reduced by approximately 80-90%.

Four credit control automation tasks

By automating credit control procedures you ensure that business rules are enforced, employee errors are removed, aged debtor times are reduced and cash flow is consistent. Additionally, your finance team will be relieved from repetitive administration. Here are four tasks that can be achieved when automating credit control processes:

  • Automated communications via email, SMS or a CRM to non-finance team employees of credit status changes
  • Customer credit limit workflow authorisation to enhance decision making. Advantageous when placing clients on hold or have a credit limit amendment. Automated letters can also be included within workflow authorisation processes
  • Automated creation and distribution of credit control communications to exact business rules
  • Support credit control decisions by integrating data from credit referencing agencies or other web services such as VIES or Companies House with your ERP or accounting application.

Of course, you can’t automate everything, achieving a balance of automation and human interaction is key. Automating repetitive, time-consuming and costly tasks enables your employees to focus on using their knowledge and expertise to push the business forward.

TaskCentre by Orbis Software – a Microsoft Gold Partner for Application Development – integrates seamlessly with Microsoft Dynamics.  TaskCentre is a Business Process Automation platform which provides companies with the ability to automate their credit control procedures and many repetitive employee-driven business functions to meet wider business goals.

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