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Common accounts receivable issues and what businesses can do to overcome them

Ola Polczynski
15 June - 3 min read

Chasing late invoice payments is a burden for any business, and still, more than half of B2B payments in Australia continue to be processed late, costing businesses, on average, $115 billion every year

The process of dealing with late payments shouldn’t be inefficient and stressful, but without adequate systems and processes in place it can get out of hand quickly. While businesses might understand the benefits of implementing digital payment solutions, many continue with manual legacy systems because these work well enough. But relying on slow and often manual payment processing and account reconciliation methods imposes a range of risks, including:

  • Ongoing cash flow problems
  • Inefficiencies across business systems
  • A lack of accurate data for informed decision-making

With the right technology, however, a business can easily automate their accounts receivable processes to ensure they get paid on time, and without error. 

In this piece, we cover some common issues businesses experience and how to overcome them.

Issue 1: Chasing overdue invoices
Late payments and uncertainty in debt recovery contribute to cash flow problems for businesses, which limits long term commercial viability. Over 53 per cent of B2B receivables in Australia are paid late. Businesses pay late for many reasons, most commonly because cash flow is hampered as a result of ageing receivables, and when one business is waiting on a payment to reach their bank account, they will likely need to delay paying off their own debts This creates a flow-on effect and perpetuates the cycle of late payments across the supply chain. 

The solution:
By implementing digital payment technologies that address late and non-payment risk, businesses have the systems that make it easier for customers to pay their invoices on time, which leads to improved cash flow.

Customers can benefit from a range of flexible payment options such as, making payment via credit card even when suppliers don’t accept card payments, effectively extending their payment terms (depending on the terms offered by their credit card provider), and accessing on-demand business finance solutions, which enable suppliers to get paid faster and allows buyers to tap into early settlement discounts.

Once an integrated payment system is in place, it also provides valuable data that can be analysed to identify trends and problems, giving decision-makers a clear picture of what’s working and what needs to change, especially in identifying high-risk customers who continue to pay late.

Issue 2: Having enough time to properly manage the collections process
Not only does it come at a huge cost, but chasing late payments is also an unproductive drain on resources for any business. Today, companies are spending about 520 hours per year on accounting and administrative tasks, including manually processing invoices and payment reconciliation, equating to over three months worth of time for one person. 

The solution:
Businesses that implement integrated technology solutions and modernise their payments infrastructure can better maximise their ROI. This includes automating accounts receivable and accounts payable processes, streamlining reporting and reconciliation, and optimising other business areas such as procurement and credit management. An automated B2B payment solution, for example, can enable businesses to reduce their invoice processing time by up to 74 per cent. 

Issue 3: Poor data management
Many businesses continue to operate across multiple systems that require manual efforts to connect data – which of course, is prone to errors. This opens businesses up to a lot of risk, including lost or misplaced customer data, security breaches and violations of privacy laws. And not only that, but poor data leads to poor decision making which can negatively impact long-term productivity and growth.

The solution:

Getting paid faster isn’t the only benefit of implementing integrated payment solutions. Robust features including automated reconciliation and reporting reduces the risk of human error while improving reporting speed and accuracy. Businesses need this accuracy to meet their regular financial commitments, plan larger investments and be prepared to shift gears quickly if required.

Spenda is a business ecosystem that facilitates the seamless transfer of both operational and financial data between businesses as they buy and sell from each other, with a goal to improve the way in which businesses trade and get paid. 

Download our free whitepaper to learn how your business can take advantage of automated digital solutions to accelerate growth.

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Ola Polczynski