Proven Tips to Safeguard Cash Flow: Learn to Build a Customer-Centric Mindset Across the A/R Team

Finance organizations globally are trying to develop innovative ideas for operations to stay relevant in today’s market to curb the impact of the evolving business dynamics. Companies like Apple, Netflix, Amazon, Airbnb, and Uber caused a significant disruption in their respective industries – and one thing common between them is a customer-first approach to doing business. Better customer experience leads to improvements in cash flow. This is possible if you can analyze custom payment behavior, create targeted dunning strategies, and meet all customer needs.

Being a customer-centric function doesn’t mean A/R teams need to meet every demand the customer makes. Still, it also implies that A/R teams should listen to them, understand their needs, and then work with them in a way that helps them achieve a mutual ground that serves both parties’ interests. There are also a few roadblocks that need to be overcome by A/R leaders to instill this philosophy

• Inability to make informed credit-collections decisions about customers
• Inability to manage electronic invoicing for customers
• Inability to update customer details in real-time

What stops A/R teams from adopting a customer-centric mindset

Here are three most commonly understood challenges that stop A/R teams from progressing towards providing customer experience:

Three-ways A/R leaders can develop a customer-centric mindset across the team

Adapting Credit and Collections Strategies

A/R leaders need to start by optimizing their core processes, such as credit and collections, and rethinking the strategies around customers.

• Control over credit is critical to recovering from the turbulent economic climate’s impact. A/R leaders must ensure their team performs intensive background research on every portfolio and double-checks them before onboarding the customers.
• Performing frequent credit reviews over a particular portfolio and checking for risk alerts. A/R teams can proactively upgrade/downgrade customer credit limits as per conclusions drawn from reviews even before the customer requests them.
• Streamlining the existing approval workflow process without having to run the same thing with multiple stakeholders.
• Researching how the customers fared and learning how this crisis has impacted them can prove highly effective. A/R teams can use this intel to devise new payment terms for them accordingly and offer alternatives that suit the interests of both parties. For example: if some of the customers have been paying on time earlier but are now delaying their payments, then offering them an early-payment discount as an incentive will help fast-track the payment cycle for the pending payments owed.

Improving the Relationship Between the A/R & Sales Teams

A/R leaders need to focus on an A/R + sales ecosystem for profitable sales in a way that bolsters cash flow and provides customer satisfaction.-

• Through credit research tools, teams should be collecting insights about customer behavior and checking if they have been growing. This would help leaders understand their profitability.
• Sharing this vital information with sales is a proactive way for the sales team to expand selling opportunities to customers. This turns the credit department into an invaluable partner for sales facilitation and expansion, and they can provide the customers with what they need

Investing in a More Know-Your-Customer (KYC) Approach

• Keeping customers close is key to building a lasting partnership valuable to customers and the A/R team’s objectives.
• Evaluating and estimating a customer’s potential before teams resume or even begin doing business with them is critical.
• Studying and evaluating the crisis’s impact on customers will help teams stay ahead of their behavior.
• They can also estimate when customers can make accurate and timely payments using this knowledge.

Conclusion

Hence, the most effective way to reduce days sales outstanding (DSO) would be to channel A/R teams to adopt a more customer-centric approach going forward. The shift towards becoming a customer-first function might be challenging and a long-term process, but it is essential to improve cash flow and customer retention.

Kevin Permenter from International Data Corporation (IDC) also has similar thoughts on how A/R teams should leverage technology to improve staff utilization and focus more on delivering exceptional customer experience and improving cash flow.