Identify Disputes Early to Improve Bottomline for MSBs

Do you want to fast-track your accounts receivables (AR) for a better impact on your bottom line? When we talk about credit transactions, one of the best ways to achieve early settlement and reduce the outstanding receivables is to understand the possible bottlenecks during settlement and plan to address them.

One such item is deductions in your AR; an open item that needs to be resolved or dealt with. On the customer’s end, the deduction is done as per their policy and regulations, it’s up to your company to evaluate and determine if it is a valid or invalid deduction. Dispute management can turn out to be a costly affair as unwarranted deductions can lead to revenue leakage.

For mid-sized businesses, deductions in AR can severely affect the company’s cash flow. Deductions are instances bound to happen but the catch here is that preventive tools can help your business to reduce deductions and comply with the customer’s requirements. Adaptive AR automation solutions such as RadiusOne AR Suite help mid-sized companies reduce bad debt while improving the net recovery rate.

Let’s explore further to understand areas of concern when it comes to deductions handling in Small and Mid-sized Businesses (SMBs). Learn how as a finance leader, you can tackle disputes in an efficient manner to improve your company’s cash flow and productivity.

Key Areas of Concern in Deductions Handling

Manual handling can make the accounts receivable dispute resolution process more gruesome and time-consuming. This tedious process can take a huge toll on your outstanding receivables. The downstream impact of inefficient deductions handling can lead to-

1. Working Capital Stuck in Disputes- When a lot of potential working capital is trapped in disputes, your company will be at risk of a decreasing bottom line.

2. High Operational Expenditure- AR teams spend a lot of time on low-value tasks of manually gathering documents. Teams across departments have to work together to verify and validate details. This is a manual and time-consuming process that affects resource utilization and reduces productivity.

3. Increased Rate of Invalid Write-offs- Invalid write-offs can gravely affect your company’s financial performance.

4. Poor Customer Experience- Most AR teams in mid-sized businesses work under an ad-hoc model with lots of to and fro communication with customers. This results in a slow deductions process while affecting the customer experience.

Best Practices for Improved Dispute Management

With a proactive approach to handle AR dispute management, your organization can reduce the cost burden of deduction. Let’s see what are some best practices that you can take up to improve deductions handling.

• Clarify and review the payment terms and policies before committing to a new customer
• Validating the purchase order line items such as pricing, quantity, terms of payments, etc. can help in sorting out any error or discrepancies to reduce the risk of future cases of disputes
• Ensure timely follow-ups with customers for past-due invoices. This will help in giving you more time to deal with any potential bottlenecks.

The Role of Technology to Enable Early Resolution

Innovative AR automation solutions have helped finance teams achieve greater efficiencies in order-to-cash processes. Read along to find out how AR automation can help to fast-track the resolution process and reduce the amount of manual intervention required.

• Faster AR Processing- Scalable automation such as RadiusOne AR Cash Reconciliation App help in eliminating manual and repetitive tasks by identifying deductions at the source based on short-payments or over-payments to enable early resolution and faster recovery.
• Improved Productivity and Efficiency- Automation reduces the dispute resolution time with better accuracy, saving a lot of essential time with optimized resource utilization.
• Improved Cash flow- A robust accounts receivable deduction management solution can help minimize financial losses from disputes and improve the cash flow.

A Way Forward

When left unchecked, inefficient deductions management can take a heavy toll on your company’s bottom line. But proactive dispute resolution can be a step in the right direction to maintain a positive customer experience with reduced risk and improved revenue. Do you want to assess how efficient your AR processing is? Take a few minutes to help us understand the problems you face with AR-

• Do you face delays in sending out invoices?
• How robust is your dispute management process?
• Do your finance staff spend a lot of time chasing faulty accounts without an idea about the aging or amount of exposure?
• What area of your accounts receivables do you think needs improvement?

Check out this blog on optimizing your AR with proactive collections management and learn how scalable automation solutions can minimize friction caused by manual AR.