Debt collection remains a strategic challenge for the finance departments of large groups and small and medium-sized businesses alike. This is all the more true given that customer risk has been further heightened by the health crisis, which has put many companies at risk. Late payment can lead to major cash shortfalls, which in turn can have a disastrous impact on your company’s financial health and long-term survival.
How can you stop worrying about cash flow?
What solutions exist?
That’s what we’d like you to discover in this article.
Current challenges facing finance departments
First and foremost, we feel it’s necessary to take stock of the current challenges and priorities facing finance departments. This will help us understand the recurring issues that CFOs face on a daily basis.
Top 3 priorities for CFOs
According to a study carried out by PwC and the Association Nationales des Directeurs Financiers et de Contrôle de Gestion (DFCG), the top 3 priorities for Finance Departments in 2022 include :
- performance management ;
- development strategy ;
- cash management.
This is hardly surprising, given that performance management is inextricably linked with optimized cash flow management to enhance a company’s competitiveness. These issues are top priorities for CFOs in the short and medium term, as they are key factors in the sustainability and development of small and medium-sized businesses, as well as large corporations.
Debt collection: recurring problems
Today’s CFOs have to deal with increased customer risk. Late payments are piling up, and customer disputes are multiplying. Not only does this put a strain on the company’s cash flow, but resolving these recurring problems is also extremely time-consuming, regardless of the size of the outstandings.
Late payments and disputes also have an impact on management, who cannot rely on up-to-date reporting to make decisions and strategic decisions for the company.
This is why more and more CFOs are seeking to establish a genuine cash culture. To achieve this, they are focusing on cash management. This means increasing the frequency of cash flow forecasts to daily and weekly. They also aim to reduce budgeting processes to between four and ten weeks.
In order to achieve these crucial objectives and optimize their debt collection strategy, 59% of CFOs want to upgrade their treasury tools.
How can you stop worrying about cash flow from debt collection?
In September 2021, Pierre Pelouzet, the French business ombudsman, told readers of Le Parisien-Aujourd’hui en France that “late payment is the number one issue for companies”.
Business law firm ARC surveyed companies in May and June 2022, against a backdrop of economic and geopolitical turmoil. The results of the study, conducted in conjunction with Ifop, show that 72% of companies plan to extend their supplier payment terms in the coming months.
What’s more, in the current inflationary context (rising interest rates, rising salaries), controlling working capital requirements, and in particular trade receivables, is a major challenge for finance departments.
At a time when the “race for cash” has never been so crucial, it’s not totally feasible to stop worrying about cash inflows. The key is to accelerate cash flow, as this also helps prevent the risk of non-payment or late payment.
To meet this challenge, it is necessary to implement a pre-collection strategy and automate the debt collection process.
DISCOVER OUR COLLECTION SOLUTION
Implement a pre-collection strategy
Controlling customer risk begins with the negotiation of payment terms. This secures the commercial relationship while ensuring that cash receipts are received on time. All this with a view to achieving the most reliable cash flow forecasts possible.
It is therefore essential to implement a pre-collection strategy that includes :
- a study of the prospect’s or customer’s solvency;
- quality control of the billing process;
- early management of potential customer disputes.
This is also an opportunity to negotiate dissuasive commercial clauses.
The pre-collection strategy reduces customer risk by acting before the risk is realized. The debt collection strategy takes over if the customer fails to meet its commitments.
Automate the debt collection process
The automation of the debt collection process enables us to be extremely rigorous, while saving an enormous amount of time. As a result, payment times are reduced, as is working capital requirement (WCR).
Thanks to the scripting of your debt collection process and the implementation of appropriate workflows, you can :
- improve efficiency in customer risk management;
- detect disputes early, even before the end of the invoice term;
- tailor reminders to customer profiles;
- change the customer’s status to assign the file to a collaborator and possibly to legal collection;
- prioritize actions ;
- real savings.
What solution should I use?
CashOnTime, the co-pilot of your workflows
To help you set up your debt collection workflows, a co-pilot like CashOnTime is essential.
In fact, the software handles all accounting and customer reminder tasks, 24 hours a day, 7 days a week. As a result, your teams can focus on the most complex files. What’s more, it alerts you to any outstanding risks. As a result, you can adapt payment terms to each customer profile.
CashOnTime gives you the opportunity to rapidly transform your debt collection process and benefit from comfortable cash flow.
It’s the perfect solution for Credit Managers and Finance Departments seeking to improve their performance by structuring debt collection and managing customer risk and disputes. You’ll have peace of mind in the face of unpaid bills!
Automate your debt collection
