Making accounts receivable the CFOs secret weapon

All too often the finance function is seen solely as a back-end department. The role of the accounts receivable (AR) team is to process invoices – ensuring that they are paid on time and following up with customers who are late on payments.

However, forward-thinking organisations and strategic CFOs are starting to realise the potential of the AR function. As the push for digitalisation and automation spreads across businesses, the AR team is increasingly able to act as a partner for growth. These teams are often the first point of contact for existing customers who have queries, and so with the right tools and support, can improve the long-term value and satisfaction those customers feel.

A recent Gartner survey found that four out of the five top priorities for CFOs in 2023 are related to bringing about significant strategic change within the finance function, particularly via new technology and data. CFOs understand that in the current economic climate of rising interest rates and the cost-of-living crisis, the finance function can make the difference between surviving and thriving.

Freeing up time for growth

One of the main reasons the AR function gets left behind is because of the mundane and time-consuming tasks that often preoccupy employees, such as manually recording data and chasing customers on outstanding payments. In fact, research shows that 67% of finance teams still manually record invoices, and that 58% spend more than 10 hours a week processing invoices and administering supplier payments.

The time spent on cumbersome processes should be used on more complex and higher-level activity, such as collaborating with sales teams to identify accounts to cultivate or developing customer relationships.

CFOs should prioritise automating AR processes to enable teams to work with greater speed and accuracy. For example, an automated platform for customer communications that delivers payment reminders, invoices, internal escalations, and follow-ups all through one single system. Teams can then use resolution and escalation workflows to approve disputes for write-offs automatically and prioritise those that need human intervention.

CFOs can take this one step further by focusing on optimising AR processes that free up cash and strengthen working capital, such as proactively approaching the collection process.

Creating a growth driver

Once AR processes have been digitalised and automated, CFOs can truly see the value of AR as vital to customer experience. An automated customer communications platform not only reduces manual toil and human error but can be key to customer satisfaction. For instance, if a customer has a particular format that they prefer invoices to be in, a digital solution can automatically ensure all invoices are changed before being sent to the customer. Staff no longer need to spend time on manual edits, and the customer doesn’t become frustrated.

It is vital for any business leader to understand and know its customers. The finance function provides CFOs with a unique perspective in how customers are operating, when to up-sell or if the customer is experiencing issues. This level of understanding will help to strengthen customer relationships, as the CFO can work with the finance team to help solve any reoccurring problems and so increase the chance of repeat business.

In the age of social media and online reviews, the importance of satisfied customers cannot be overstated. Customers cannot have a great experience with the sales team, but then the finance team messes up the invoicing process. The AR team needs to be the pinnacle of great customer service, and so drive growth as a result.

Enabling cross-department growth

The impact of automating AR processes goes far beyond the finance function. AR teams can play an important role in driving growth by becoming a partner with sales departments. Finance teams can allow sales access to their centralised data on a customer’s payment history, to indicate which accounts could be made more profitable.

Another step is embedding artificial intelligence in the platform, so teams can then also start to identify trends and predict future behaviour. These insights can help sales teams make more informed decisions about which accounts to pursue, what types of credit to extend, and what kind of offers to make.

Likewise, CFOs can also tap into this data to make more accurate cash forecasts. Key performance indicators, such as the percentage of customers who pay late, unreconciled items, and monthly write-offs, help CFOs provide the C-suite with a better understanding of the company’s financial health. By using this data in strategic meetings, CFOs can provide better financial context to help decision making.

A growth mindset

The tools needed for the finance function to be a growth driver are already there, but the mindset must come from the top. CFOs need to encourage C-level executives to embrace technology that will transform AR into a strategic business partner.

No one can predict what is in store for the economy over the next year, but CFOs can start future-proofing the business. Investing in the finance function should be the first step.