The Background: Inflation
Rising prices for production, materials and wages. Shortages and supply chain issues exacerbating the issue of getting stock out to customers.
Rising interest rates: the cost of borrowing to fund the cashflow gap is no longer palatable to shareholders.
The Battle: CCO v CFO
Chief Commercial Officers are determined to keep prices stable for as long as possible. Chief Financial Officers want to pass on rising costs to customers in the form of price rises in order to protect profitability. Looking around in the market, you can see your competitors raising prices and losing business so the win-win situation would be to help the CFO maximise margin and let the CCO keep prices attractively lower than the competitors to encourage sales orders and win business from competitors. But how?
The Win-Win Solution
If you have not already optimised credit collections (and even if you think you have there is probably more you can do), then this is a potential goldmine. The aim should be to:
- Reduce outstandings – close the gap between invoice due date and payment
- Reduce bad debt – lower the bad debt to sales ratio so you are not throwing money away
- Cut the cost of getting product out and cash in on time.
Collections is a great place to focus your attention because a little automation goes a long way to helping you focus your collections specialists on the accounts that matter. With reminders and Dunning letter sequences on auto-pilot for most of your smaller accounts, your team can get on the phone to the important customers. Who are these customers? They are not necessarily the high risk customers in credit terms, they may be the ones that pose the highest risk to your revenues if they walk. With Corrivo, you can create as many groups of customers (segments) as you like and you can apply the low touch or high touch collections sequences as needed. You can even switch customers dynamically based on parameters such as the overdue value.
The Power of Insight
What you won’t have if you have not automated your collections processes is data. Without real-time data and near real-time reporting the process of working out which customers you should focus on is time consuming and prone to error. With Corrivo, you can easily see what’s happening, what’s changing as result of your tactics, and where the problems are. That will save your AR team a lot of time lifting and shifting data from one place to another. Corrivo can serve your data on a plate so you can analyse it for the all important insights that help you refine your strategy and hone your approach.
We typically say if you don’t reduce your Average Days Delinquent (ADD) by 25% in 4 months, and have this in synch with your Days Sales Outstanding (DSO), which should go down by at least 25%, then you’re not working the system to best effect. But here’s the thing: we don’t take that risk – we keep working with you to help you make best use of the system to reach your goals.
A Bigger Slice of The Pie
Getting cash in sooner should increase margins. In addition, you’ll be reducing the cost of doing what you do. Your results will be better, faster and less expensive to achieve. More margin on each sales order by reducing the cost of Accounts Receivable processes: sound like something you want? Get in touch.