How Delayed Invoice Remittances Impact Your Business Relationships
Unallocated or misapplied payments can be just as disruptive as late payments. If you're on the AR team, you're probably all too familiar with the difficulty in tracking and managing payments, the confusion in matching them to invoices, and the uncomfortable conversations with customers.
When payments aren't late but are marked as such, it's often a result of inefficiencies or errors in the remittance process. In this post, we're diving into the impact of these bottlenecks on your customers and your AR team. And our seven tips to ensure bottlenecks aren't a pain in the neck anymore.
What does delayed invoice remittance look like for AR teams and your clients?
Your AR teams can sometimes feel more like Don Quixote chasing invisible windmills than finance professionals because they're stuck in an endless cycle of frustration, nagging customers for payments they've already made.
But AR teams chasing phantom windmills are only half of this story. Delayed invoice remittance also strains customer relationships and the confidence amongst shareholders in your supply chain due to increased inquiries and disputes because of the inaccuracies.
Let's look at these ripple effects on your clients
The impact on your client relationships
Clients are confused and unpleasantly surprised when they receive inaccurate statements. When this becomes a habit, frustration can build up as they spend their valuable time sending inquiries and elevating disputes with your AR team. This can lead to lowered trust in your company or, potentially, even negative word-of-mouth.
As a final insult, clients who consistently experience billing errors are most likely meeting with your competitors, and all promise they can do a better job. Grim? Unfortunately, but there is light at the end of this blog…
The impact on your AR team
You don't need a data analytics or finance degree to know when a company's invoice remittance management is suboptimal. Just visit their Accounts Receivable department.
You'll find bright, passionate, innovative AR teams wilting under the increased workload of manually correcting billing errors and tracking down payments in the system. Not only that, but the constant stress of dealing with unhappy or frustrated clients is putting the AR department under significant strain.
On top of this, management is putting pressure on teams to perform because the delays are snowballing into a struggle to meet performance targets, such as reducing the average days of sales outstanding (DSO).
(PS. If DSO is your pain point, we've prepared this comprehensive guide to help: Accounts receivables collections: How to reduce DSO and improve your accounts receivables.)
But all is not lost, far from it.
7 tips to mitigate the impact of remittance inefficiencies and errors
Reliable invoice remittance is a cornerstone of best-practice AR management
Given the ripples caused by invoice remittance delays, what strategies can Accounts Receivable teams take to avoid it?
1. Implement automated remittance processing systems to match payments to invoices, reduce manual errors, and streamline remittance
2. Digitize your invoice and statement processes via an electronic invoicing, statements, and payment platform to streamline processing, reduce errors, and receive real-time payment tracking
3. Establish clear standards for remittance data format and ensure that customers comply with these standards to minimize errors
4. Implement automated checks to identify and correct errors in remittance data before payments are applied
5. Provide regular training to AR staff on remittance processes, error identification, and resolution procedures
6. Continuously monitor remittance process performance and identify areas for improvement to optimize efficiency and minimize errors
7. Clearly communicate remittance instructions to customers to avoid errors and ensure accurate payment processing before they snowball
For more tips on automating invoice remittance, check out our in-depth guide: An AR team's guide to Invoice Remittance Advice
Streamline your invoice remittance process with your free trial of System1A
Due to their narrow cash flow margins, invoice remittance delays hit small and medium-sized enterprises (SMEs) the hardest.
At System1A, we provide companies of all sizes with the tools (and data) they need to ensure an optimized invoice remittance cycle without draining critical resources.
Additionally, by digitizing accounts receivable (AR) processes, automating invoice delivery, and leveraging the data locked in your enterprise resource planning (ERP) systems, System1A can streamline payment processes, accelerate payment speed, and optimize your invoice remittance cycle.
Ready to explore our platform that simplifies tracking and managing invoice remittance? Take a test drive with a free one-month free trial.
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