Collaboration and continuity are two extremely important parts of running an accounts receivable department. So, what exactly do we mean by collaboration and continuity? These two words can hold a lot of meaning, so we will break it down for you to understand exactly how the accounts receivable department can be including this in their strategy.
In this whitepaper we will cover, why collaboration and continuity are important for your accounts receivable strategy, key collaboration with executives, key collaboration with the sales department and how to create a continuity plan.
WHY COLLABORATION AND CONTINUITY SHOULD BE PART OF YOUR ACCOUNTS RECEIVABLE STRATEGY
Collaboration and continuity are key to creating an accounts receivable strategy that ensures efficiency. Without these two aspects, it’s likely all the other steps you’ve taken in your strategy will fall apart. How can you enforce escalation without collaboration with your team or credit policies without consistency?
Collaboration covers two distinct departments that should be included in your accounts receivable strategy. The first is included executives in developing your strategy. Ultimately, your CEO and CFO will have overall business objectives that they want to achieve by the end of the quarter or year. These business objectives will likely include goals like increasing cash flow by X percentage or growing the business by X percentage. Accounts receivable is key to reaching these goals, so the executive team should be working with you to help you decide how to craft your strategy and aid in meeting business objectives.
The second department to include is the sales department. Sales representatives often lean on extending credit to close deals. If they don’t have any credit to extend, it will be difficult for them to meet their sales objectives. Therefore, they should be collaborating with the accounts receivable team to develop a strategy that helps them meet their overall goals.
Continuity means that your department is following through with each tactic in order to collect more efficiently. It means that every person in your department is on the same page and knows what steps they should be taking to follow through with each area of your strategy. Without continuity, it will be very difficult to reach the goals of the accounts receivable department. You might have one collector who is following a specific call script that works well, while another takes each call without a goal or script and tends to strike out. By creating continuity, you can guarantee that every team member is putting their best foot forward.
GETTING BUY-IN FROM EXECUTIVES
Often times it can feel like the accounts receivable department is living on an island. You’re going through your daily routines of calling customers, sending out emails and managing prioritization of accounts, you don’t interact much with the other areas of the business. However, collaboration with the rest of the company in accounts receivable is extremely important. Accounts receivable is one of the most important departments in a company, it brings in the cash flow needed to continue running all operations. For this reason, it’s especially important to have collaboration between executives of the company and the accounts receivable department.
When it comes to developing an accounts receivable strategy, having input from executives can help to develop an overarching goal that supports the rest of the business.
MEETING BUSINESS OBJECTIVES
Every year, your executives come up with overall objectives to hit for the year. Often times, these are broad goals for growing the business and every department plays a role in helping meet those objectives by the end of the year. Marketing helps to gain more leads, sales helps to sell more deals and accounts receivable helps to collect cash – all to support the objective of growing the business by 10% over the next 12 months. Your executive team should be actively collaborating with you to create an accounts receivable strategy that will help them reach those goals, whether it has to do with credit limits, escalation of invoice disputes or general collection efforts, their input can help the business as a whole.
ESTABLISHING REPORTING METRICS
There really is not point in making changes to your process or creating a strategy if you’re not going to measure how these make a difference in your collection efforts. Working with the executives in your company can help you to decide what metrics are most important to your business. There are always metrics that you can use for your own purposes, such as looking at each collector’s collection call success or collection effectiveness index, however, your executives may not want all that detail. They probably just want to see the effectiveness index of the department as a whole, and this can be determined through collaboration.
SETTING BRAND EXPECTATIONS
Isn’t brand expectations something the marketing department needs to worry about? Yes, but so does accounts receivable. You are an extension of customer service for your business and it’s important to remember that when talking to customers. After collaborating with executives on accounts receivable strategy, you should have a good understanding of how they expect you to represent their brand and treat customers. They might have set protocol for how to deal with a disgruntled customer or invoice disputes, but this can’t be revealed until collaboration occurs.
COLLABORATING WITH THE SALES DEPARTMENT
One relationship that often times isn’t existent in a company, but really should be, is a relationship between the accounts receivable department and sales. Collaboration between these two departments helps create a cohesive channel from order to cash. These two departments shouldn’t be working in silos, as this only negatively impacts the customer’s relationship with your company.
When it comes to developing an accounts receivable strategy, it’s important to work collaborate with the sales department to gain input and insight in what will work to increase overall sales and make collections more efficient.
SETTING CREDIT LIMITS
Setting credit limits is not a task that is taken lightly. Each customer needs to be examined and processes should be put in place to ensure that the correct credit limit is set. This is where input from the sales team is crucial. If the bar for credit limits is set too high, this will negatively affect your collection efforts and allow customers who should not be extended large amounts too much leeway. However, if the bar for credit limits is set too low, this can negatively impact the sales department. It can make it difficult for them to make a sale if customers who are worthy of a larger credit extension can obtain one. They might just consider going to your competitor for the product or service instead. This is why a happy medium needs to be decided upon between the accounts receivable and sales department.
MAINTAINING CUSTOMER RELATIONSHIPS
The emails and letters you choose to send to your customers to collect reflects back on the company’s customer service. Obviously, it’s important to create professional collection templates that include a sense of urgency for the customer to pay, but if you err too much on the side of harsh and strong words, it could be damaging to the relationship with that customer. As a result, you could end up with angry customers or they could choose to take their business elsewhere. By collaborating with the sales department, you can use their insight into their customer relationships to decide where you need to draw the line between stern and rude.
We all never want collections to come to this, but, alas, they are unavoidable. When they do end up being escalated, it’s important to use the sales department as your backup. When creating your accounts receivable strategy, create a process for when you need to call the sales department into your conversations with the customer. The sales team has a different, personal relationship with the customer. The customer trusts them, which is why they chose to make a large purchase from them. Utilize this personal relationship to find out why the customer isn’t paying and to break the news to them that if they don’t make a payment soon, their account could be put on hold. If this is included in your accounts receivable strategy and process, you can leverage your collaboration with the sale department.
CREATING A CONTINUITY PLAN FOR YOUR ACCOUNTS RECEIVABLE STRATEGY
In the accounts receivable department, it’s important that everyone is on the same page. This is where your accounts receivable strategy comes in handy. At this point with your strategy, you have collaborated within your department and gained input from executives and sales department. Now, it’s time to make sure that everyone in the department is aware of your strategy and is following through with it to a T.
Creating continuity in your accounts receivable strategy means that every collector is following the same path to collect. Imagine there are two collectors in your department. The first collector has been working in the accounts receivable industry for many year and has a tried and true way of going about her collection calls. She knows how to speak to her customers in order to most effectively collect the money that is due and has perfected the art of maintaining good customer relationships, which has further helped her to collect. The second collector is new to accounts receivable and has only been on the job for one year. He struggles to find the right words to say on his collection calls, but he does a really great job with his emails. He knows what type of subject lines will really grab the attention of his customers to get them to open the emails and take action. Both of these collectors have their strengths, but each also have their weaknesses.
By building continuity into your accounts receivable strategy, you can ensure that all your collectors know how you want them to collect and teach them the most efficient way to go about it.
If you create email templates for your collectors to use when they are sending out invoices, first notices, follow ups, etc., you can guarantee that they are using the verbiage and language that is most effective to get paid on time. This way, you don’t have to worry about one collector under performing in comparison to the rest. It’s also a great way to onboard new employees who may not be privy to how you would prefer collectors to speak with your customers.
Creating call scripts is one of the best ways to make sure that your collectors are not flying off the handle at customers. Hopefully this isn’t a current issue for you, but it helps to make sure there is that extra barrier from reaching bad customer service. Your call scripts can cover how to handle invoice disputes, chronic late payers, claims to have never receive the invoice and other common, frustrating scenarios.
When you’re creating your accounts receivable strategy, it’s important to include timing and process for when a collector should escalate a situation to a manager. You don’t want collectors handling dispute situations or creating new payment plans when they don’t have the authority to do so. Your continuity plan should cover how every collector should escalate a situation and when.