Accounts Receivable article and permission to publish here provided by Nathan Miller at tesorio.com.
Many companies hesitate to upgrade or change their Accounts Receivable System simply because they feel they can continue to achieve the same results using the same systems and processes as they did five years ago.
If you are a smaller company just looking to send a few automated dunning letters and have your AR team identify which invoices are past due, there may be no reason to change.
But if your company wants to improve free cash flow and cash conversion cycles, you must be sure your AR system is driving efficiencies in your processes – if you hope to grow without spending significant dollars on headcount.
Cash flow is the number one reason why most businesses fail: 82% of small businesses go under due to poor cash flow. This challenge isn’t limited to small businesses, either. Just this year, KPMG found a discrepancy in accounting, including Accounts Receivable and Payable, at Meredith Corp., one of the biggest media conglomerates in the country.
“KPMG uncovered shortfalls in oversight of the processes used to calculate the fair value of Time Inc.’s accounts receivable and accounts payable, which were brought across to Meredith’s books when it purchased Time on January 31, 2018,” reported the Wall Street Journal.
Accounts receivable and accounts payable are critical aspects of a business’s financial health. Understanding how these two accounting functions impact your cash flow and overall growth can mean the difference between another year of healthy profit – and becoming another statistic.
Here’s what you need to know about optimizing the processes of accounts receivable and accounts payable.