Organizations understand the impact Accounts Receivable (AR ) process can have on cash inflows, however, AR Management is one of the biggest challenges facing any Company.
Picture this familiar scenario:
Its Monday morning and the CEO has just received the AR aging report. He calls in the CFO / Finance Controller and the Sales Head + Managers for a meeting. A pleasant meeting soon turns into a verbal slug-fest with Sales accusing Finance of not sending invoices on time, incorrect invoices, wrong rates, wrong quantities etc, and Finance accusing Sales of not responding to mails, of not reminding customers about payments and in general, of not protecting Company’s interests.
The CEO is left scratching his head, Who owns Accounts Receivable ? Look at the ping-pong debate below:
Our job is to bring more business and collection is a big distraction. it’s a back-office job and hence, Finance should own AR ”
Finance: “No sale is complete until money is collected. Sales gets incentive and should own collection”
Sales: “Following up for collection will impact sales persons relationship with customers and customers will avoid meeting us”
Finance : “Good times or bad times, Sales job is to manage customers. They are in best position to handle customer and collect.
Finance do not any connect with customers and their follow-up may negatively impact customers”
Sales: ” Finance owns the billing and accounting and hence should own collection ”
Finance: ” Sales incentives should not be paid till money is collected ”
And so, the battle rages on….
On a given day one function may win the battle, but lose the war of having cash on hand to support business. Improper AR management could lead to unhealthy cash inflows and companies end up in tough situations.
When one need to win the Cash-flow War, companies need to learn to work as one team by putting company first and then their business function. Iron out issues that makes AR process a problem – re-sending invoices and supporting documents, payment reminders, tracking tasks related to specific invoices and many more.
There are tools available in the market which takes that extra load away from Sales or Finance, using automation, thus focusing energies on growth.
Kapittx is one such automation tool that makes Accounts Receivable process more efficient making both Sales and Finance to smile, work together to win the cash flow war.
That said, will be great if you, in your capacities as CXOs / Managers, could share your experiences / perspectives on this topic.