Managing Cash in Tough Times / Receivables Strategies

by Erin McCune on June 2, 2008

in Economic Outlook, Receivables, Technology, Treasury & Cash Management

The June CFO Magazine advises corporate treasurers on how to manage cash during difficult times. One specific suggestion is to keep a close eye on receivables:

Encourage quicker payment of accounts receivables by (1) not
compensating salespeople until an order is paid for, (2) calling
overdue customers when a bill is one day overdue rather than seven days
overdue, and (3) using stop shipments with customers who haven't paid.

Yet most A/R departments are struggling to identify what their customers are paying for (because most payments and remittance information remain stubbornly paper based, e.g. checks and printed lists of invoices, deductions, etc.) and have arduous, manual processes to apply payments to their customers accounts. Thus the availability of A/R data is often delayed, making the data difficult to act upon in a timely manner. Many of the companies I know would gladly take the steps recommended in the article, if they could be certain that they had applied their customers payments in a timely manner and weren't calling  to seek payment or cutting off shipments while payment was stacked on an A/R clerk's desk. (Tying sales compensation to paid orders is one surefire way to get funding to revamp AR technology!)

The economic downturn will make these shortcomings painfully clear as corporate finance grapples with the painfully slow receivables process (and the data trapped within it). Perhaps the liquidity crisis is just what is needed to motivate more companies to consider electronic payment.

One Response to “Managing Cash in Tough Times / Receivables Strategies”

  1. Keahi Pelayo says:

    Thanks for the advice on cash flow.

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