A helpful release on the CFO site reminds readers of the basic blocking and tackling required for the effective management of outstanding cash obligations, or getting out in front of potential delinquencies. This has become all the more evident in the wake of pandemic-related inefficiencies and analog processes, which have kept vulnerable businesses from getting through the pain of cash flow shortages. The author is a senior at APQC and has some data to share, so it is worth a look for the couple of browsing minutes the piece requires.
‘If cash is the lifeblood of a business, the revenue cycle is the circulatory system. The process of extending credit to customers, billing them for goods or services, and applying remittances to open receivables all pump blood through the body of a business. Delinquent customers and bad debt keep blood from circulating. They cause write-offs, dent profitability, and increase the cost of collections…
This month we delve into the percentage of active customers that are delinquent at any time during the year. By definition, a customer account 30 days past due is generally considered delinquent.’
We have covered the criticality of cash cycle process consolidation (at least from the perspective of interconnecting the siloed efforts involved) in various member research pieces over the years, and this posting is a good reminder of the importance of solid communications between systems. Given the information available for early warning purposes in credit and other analytics, excessive delinquencies and collection costs are much more avoidable than many companies realize. Worth a read as the author goes through some high level strategies for achieving these ends.
‘Done well, the strategies above are a win for finance and for customers because they improve visibility, leading to more robust decision-making, clearer communications, and a professional approach to dispute resolution that preserves customer relationships.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group