Managing large volumes of outstanding A/R
Late payment happens to be part of the deal for most businesses, especially in the technology sector. When you have an intricate global supply chain, one business struggling with cash flow means its suppliers would be the next.
In the current changing economic conditions, the global market still has potential for growth; however, heightened competition and rising procurement costs and capital expenditure have impacted the margins of many businesses and compelled them to defer payments.
This could happen to your new and existing customers alike and make any of your accounts receivable carry the risk of default. Forecasting late payments could be difficult as most technology companies do not have insights into the supply chains beyond their direct customers.
When outstanding receivables accumulate, they create far-reaching problems. Collections is no longer recovering debts, but merely keeping tabs on the invoices. Suddenly it is a struggle to know what has been paid, what has not been paid, and why that was. While you are juggling with the overdue invoices, new invoices become past due.
All together, they take up the time and resources from other business aspects, eat into cash flow and profit margin, and reduce investment for growth. If a technology company wants to boost their bottom line, they have to address the problem of collecting outstanding accounts receivable in volume.
It is important to be consistent in your debt recovery approach and know all your options to minimise the number of past due invoices and keep credit risk under control.
In most instances, there are three aspects that you can focus on to manage a huge volume of outstanding accounts receivable successfully:
Keep reading the tips that can help you unlock cash on your balance sheet and fuel your company's growth.