This Guide on How to Improve Your Accounts Receivables covers:

  • Why it’s important to maximize the usefulness of operational cash
  • How to remove uncertainties around terms management
  • How to improve dunning processes customer communications about upcoming and outstanding payments
  • How to make paying you easy for your customers
  • How to choose the best payment methods for streamlined AR
  • And more!

Who is this profitability guide for?

To help improve profitability, this guide is ideal for:

  • Accountants or bookkeepers
  • Controllers
  • Finance leaders, including CFOs and Directors of Finance
  • Owner/operators

Accounts Receivable Guide Preview

Operational cash is your business’ number one resource for maintaining current operations and
expanding into new areas. And what’s just as important is having a plan for it. It’s crucial to
accurately track your incoming and outgoing transactions to leverage or plan around your cash.
For the high-volume, low-margin food and beverage distribution industry, this is especially
challenging to do accurately.

To maximize your ability to make use of operational cash, distributors should be looking at four
key business outcomes:

  • Reducing days sales outstanding
  • Shortening cash conversion cycle
  • Enhancing financial planning and analysis (FP&A) function
  • Lowering accounts receivable (AR) costs in both time and money

By reducing days sales outstanding, you can reinvest into your business faster and more
regularly. This is crucial to both enhancing and maintaining ongoing operations and planning
future growth because it provides flexibility around when purchases and investments can be
made. The challenge, however, is in accurately forecasting payments.

Shortening your cash conversion cycle allows your business to move faster on value-added
investment decisions. It also helps your pool of available cash grow larger over time, enhancing
business agility and providing a cushion of support for future purchases, investments, or to help
weather downturns. But customers must be convinced to make payments on shorter and more
predictable cycles.

While FP&A can take a backseat in the standard grind of managing accounts receivable, it’s a
critical capability in safeguarding the future of your business. Accurately forecasting budgets
helps you plan around both expenses and income. Doing this accurately is crucial to maintain
operations, make investments or purchases, and weather unexpected financial headwinds
without overly pressuring your finances. Effective FP&A, however, depends on real-time,
accurate financial records which lead to sound assumptions for how cash will flow in the future.

Finally, minimizing accounts receivable costs is key to maximizing its efficiency. Since it’s a pure
cost, the goal is always to minimize the time and money it takes, which can spin out of control
when accounts are behind or delinquent. The trade-off is that efficient and accurate accounts
receivable is necessary to realize operational cash and gather the necessary context to use it.

To achieve these outcomes, distributors need to ensure they’re leveraging the right
technologies and best practices through the six major domains of accounts receivable:

  • Terms management
  • Customer communications
  • Dunning
  • Payment management
  • Closing and reconciliation
  • Governance

Want to read the full guide?