Fintech Insights

In uncertain times, improve cash flow and risk by working smarter

Keith Cowart | senior product manager, FIS

April 29, 2020

The corporate landscape has dramatically changed in an instant. COVID-19 is a force that the modern business world has never faced before. After ensuring that their employees and families are safe, companies are beginning to focus on their short-term survival and long-term viability. One major focus area is around improving cash flow and reducing risk.

Companies view the management of working capital, particularly accounts receivable, as an important measure of a company’s financial health. And credit and collections departments play a critical role in bringing cash into the organization, so it’s important to consider these five points to ensure you’re operating as effectively as possible.

1. The ability to work remotely

Some companies were already prepared for working with a remote workforce in their credit and collections departments by implementing a credit and collections management solution that features a cloud deployment, remote access, automation and AI to aid with decision-making. Companies that were not prepared are now looking for a partner to provide such a solution.

Outdated, manual processes are difficult to track and manage even when your full team is within the same office every day. With stay-at-home orders across the globe driving teams to work remotely, it’s even more difficult to stay on top of day-to-day activities.

Specialized credit and collections management solutions that offer remote access allow team members to work from any location. Credit and collection managers have visibility to the daily assignments and the work being completed and can quickly adjust assignments as circumstances continue to change. Visibility into cash flow impacting activities makes it easy for managers to understand how to make improvements.

2. Credit applications and reviews

During these uncertain times, credit managers must review credit applications with a very different lens. Where a company may have been willing to take on a certain level of risk before, they now must make decisions that will help reduce the level of risk until the economy recovers. Credit managers can leverage their specialized credit and collections management solution to quickly adjust their credit policy criteria, which will simplify the reviews conducted by their teams.

Many companies also have a policy in place to review outstanding credit lines once every few months, quarters or years. Now, they will be tasked to review all accounts to ensure they’re not unnecessarily exposed to more risk than the company can bear. Through automation in the credit review process, accounts can be automatically scored and any exceptions that require additional scrutiny can be automatically routed to the appropriate reviewer/approver.

3. Collections management

The collections process is a major part of every company’s cash flow. With AI and automation, credit and collections teams can lower days sales outstanding and improve cash flow by prioritizing customers by collections risk. AI can also accurately predict the likelihood of future delinquency, which is a massive benefit in preventing it from ever occurring. Finally, by automating correspondence, AI allows you to easily create and send emails with special messages of support and understanding to your customers without impacting your ability to focus on cash flow.

4. Dispute/deduction management

Disputes and deductions are likely to increase over the foreseeable future. As cash flow becomes tighter, customers will be very particular about what they are willing and able to pay.

Be prepared to handle an influx of these disputes and deductions with automated identification, coding, routing and approvals. Without this automation, disputes will pile up, overwhelming companies and making future write-offs a very real and daunting possibility. A credit and collections department can be crippled by a manual dispute process that grows out of control.

5. Cash application

Getting cash in the door and correctly applied in the accounting system is an often-overlooked piece of the credit-to-cash process. Companies that are dealing with this manually have teams of people dedicated to retrieving remittance data, matching it up against incoming payments and banks statements, and then finally posting it against open invoices.

Automated, specialized solutions that incorporate AI and machine learning relieve the manual work and improve over time by learning how exceptions are processed.

By speeding up the cash application process with automation, you reduce errors and rework the resources required to apply the payments while speeding up relief of the outstanding AR in the accounting system. You also create more accurate cash flow forecasts and collection queues while freeing up credit lines for more revenue-generating sales activity.

Improving cash flow and removing risk is a major focus for companies. With remote management, automation and AI, you can focus on being good social stewards to your employees, vendors and customers as we all get through this period together.