The New Year 2023 is expected to bring both challenges and opportunities, especially for mid-market CFOs who now have the arduous task of managing their accounts receivables amidst economic downturn. Given year end, it is also the time when your days sales outstanding (DSO) looks wavering and past due invoices are sky-high.
Reactive dial-for-dollars procedures with broken commitments and consistent scripted follow-up will not move the needle. All of this will be amplified owing to reduced productivity because of holiday aftereffects in addition to the economic turmoil. This will cost businesses uncollected dollars, and staff hours spent seeking to collect the deficit.
The impact this has on top-line metrics is a reminder for CFOs to course-correct and ensure that the finance function is better-equipped for uncertain economic swings of 2023—to help their teams collaborate better and achieve more in less time.
As mid-market CFOs step in January 2023 and your collections look bleak post holiday season, we recommend that you review your entire accounts receivables process rather than restricting yourself to a tunnel-visioned strategy.
Here are points that CFOs should not overlook while putting together a forward-looking digital transformation strategy—which stays robust for the next few years.
Build capacity for your business to sustain through tough economic times
Let’s begin with some questions –
- What revenue is your company targeting by 2025?
- How many customers are you expecting to close each quarter?
Once you’ve figured out the answers to these questions, it is time to keep the business trajectory in mind to ensure that your accounts receivable function becomes an enabler and not a bottleneck for a smooth cash flow.
Furthermore, think about the three pillars of enablement for any finance function; People + Processes + Technology. For example, if you are heading a fast-growing mid-market company, aiming for revenue to touch from $20 Million to $500 Million by 2025 – assess if your current team of 8 people will work? Would hiring another set of 10 people over the next three years let you manage the scale? Maybe, not.
The mid-market offices generally believe in having lean teams and have a limited budget. While you are building capacity, increasing overheads by adding members to your team that you’ll need in 2025 might not be the best strategy—it’s as good as depleting resources. Therefore, your accounts receivables digital transformation strategy must contribute to accelerating growth instead of depleting your resources.
What mid-market CFOs really need for their finance function is to build rock-solid technological capacity to make AR processes more efficient such that it can thrive through economic uncertainties. This will require the identification of heavy and transactional tasks that don’t require human intervention to automate them. Tracking these metrics for your AR processes can help you achieve your goals faster.
When these moving pieces come together for a CFO—it will help them strengthen the working capital and ensure that nothing slips through the cracks. So, before this year ends, plan on building capacity such that it supports your growth objectives until 2025 rather than chasing growth each year.
List down the challenges to conquer the targeted growth amid economic downturn
While planning the 2023 strategy for your finance function, it is imperative to list down all the challenges that will restrict scalable management of the processes in your office. Here are some categories that you can look out for:
- Assess the tasks that are plaguing your team’s man-hours
- Evaluate if your customer experience is compromised
- Check if you have the right infrastructure for managing expected volume
- Examine your team’s readiness for overseas expansion – if planned
If we stick with the example from the Christmas collections crunch problem, then here is a checklist that can help you nail down the accounts receivable challenges that you would want to solve in 2023:
If you work with your team to look at the bigger picture and holistically analyze all the problem areas such as improving collections strategy for the accounts receivables function. As a next step, you can align these challenges with your business’s priorities and ensure that your growth goals are not impacted or limited because of uncertain economic swings.
Prioritize challenges based on big-picture goals
Once you have built an elaborate list of challenges, take the next step and prioritize the challenges to be solved. Your company might be planning to focus on specific areas like:
- Improving customer service and customer value
- Strengthen working capital
- Better management of growth in business volumes
- Onboarding customers faster
- Using AI or ML and automation for enhancing employee productivity
Let’s understand how these challenges can be prioritized in alignment with company goals:
- A low NPS you need to fix in 2023? Consider improving the customer experience by accelerating customer onboarding, reducing invoice delivery time, and resolving customer disputes ASAP
- Similarly, if you were to strengthen working capital, then it would be a good idea to have a way to intelligently automate dunning and timely apply cash collected against open invoices
- If your focus is to manage volume growth in the coming years, then you’ll need to shorten your credit evaluation period at the time of onboarding and ensure timely invoice delivery with an option to enable customers to opt for e-payments
Base decisions on insights derived from data aggregated from all sources
Data is the new oil. 76% of CFOs believe unifying disparate data is vital to achieving business objectives and we couldn’t agree more. If your team is not harnessing data as a catalyst to boost business growth, then you are losing an edge over your competitors and business growth opportunities to improve processes and performance of top-line metrics.
So, if you are aiming to improve collections efficiency in 2023, then the first step is to move away from disparate systems. Have your credit information, past invoice payment behavior, disputes raised available at one place and transform your collections by deducing actionable insights which will:
- Auto-generate prioritized worklist of customers who are likely to delay payments to help your team plan proactive collections strategies
- Help prioritize collections from at-risk customers with fluctuations in credit evaluations
- Complement your team in their off-time and shoulder heavy lifting the customer correspondence, which can be equipped with data-based conditions of customization, to name a few
With larger sets of data being available, by using the right technology, you can further enable your finance teams to derive actionable insights by leveraging AI. Furthermore, you can free up valuable time for CFOs and teams to spend more time applying insight to value-added business decisions.
Choose state-of-the-art technology without compromising on innovation
Though your organization might already be following a digital transformation roadmap, you shouldn’t miss out on validating that your current strategy is not outdated to weather the storms of economic downturns. There are a few steps you can take to not overlook innovation and validate your strategy at the same time:
Step 1: Ensure that your digital transformation roadmap is modern. For Eg. Check out this infographic which explains how businesses can take a shorter route to accounts receivables automation.
Step 2: Evaluate if your current ERP/Accounting software/CRM software is solving all your current and pre-emptive future requirements. This is essential as you’d want your teams to be sufficiently equipped and productive with the right tools to strengthen working capital and cater to the business volume that you are targeting.
Step 3: Evaluate the next step you’d like to take to disrupt available technology. It could be supporting opening up your financial office to support multiple languages or currencies if global expansion is your focus area, or it could be to get a new vendor to level up your processes and remove gaps. It is recommended that you set up a checklist to understand if, in 2023, you need a new vendor for reforming your accounts receivables, treasury, or accounts payable processes. If you are looking to improve your accounts receivable, here is an interesting article that has top 10 questions you can ask accounts receivables Vendors to help you boost your accounts receivables processes.
Conclusion
While we focused on the economic uncertainties to explain how mid-market CFOs can approach their 2023 automation strategy for finance function, we’re sure that the shared approach will help you revisit and optimize digital transformation strategy for your finance function.
If you’d like to focus on increasing the efficiency of your collections process, then HighRadius offers you a one-stop solution for all your woes! You can check out this e-book which explains how you can build an effective collections strategy.
The RadiusOne AR Suite from HighRadius is tailor-made to suit the needs of mid-market businesses. You can automate invoicing and collections with the e-invoicing & Collections app.
On-board clients faster with the Credit Risk app which uses industry best practices to assess your customer’s credit score. Make reconciliation easier with the Cash Reconciliation app with Invoice Matching and Deductions Coding based on remittance data from multiple sources. All this, while you enhance the productivity of your team and work towards reducing DSO!
Would you like to learn more about the range of solutions at HighRadius? Request a demo here.
Get in touch with us to explore our RadiusOne AR Suite that is tailor-made for mid-market CFOs.
