Business demands are astronomical for wholesale distributors due to the digital era.
While distributors have always had to account for changes in customer expectation, today’s distributor faces an unprecedented challenge of perfecting their accounts receivable processes to get products to customers at the speed of e-commerce.
As the demand for faster delivery of more products grows, your processes must be flexible enough to complete more orders faster and with no errors.
What is accounts receivable?
This is the balance owed to your company once your customer receives your product or service. You typically notify the customer of their balance via invoice.
It is sometimes called A/R and should be listed as an asset on your balance sheet.
It’s critical to know which invoices have been paid and which are outstanding. This is important to keep cash flowing through your business and to accurately forecast how much cash you have for future plans.
Problems with using paper invoices for accounts receivable
As most business is initiated and tracked online, anywhere that paper is involved slows down the accounts receivable process.
Below are a series of issues with using paper invoices:
Too time-consuming for staff
More incoming orders means more admin work for your staff to manage. If you’re using paper invoices, your team will be burning time by manually checking details and updating invoice statuses.
This is valuable time that could be spent building stronger customer relationships and better customer experiences, or even using real-time insights to make smarter decisions that would benefit the business.
Prone to errors
Paper processes are more prone to errors.
As you and your team move quickly to process accounts receivable, it gets easier to miss inaccuracies that could ultimately delay payments and negatively impact the customer experience.
It’s difficult to track invoices
If you’ve ever made the mistake of sending a client an invoice that wasn’t theirs, you understand how easily a misstep such as this can happen.
Imagine if Customer A notices Customer B’s invoice includes a preferential rate that they aren’t privy to. And now Customer B hasn’t been invoiced at all.
This happens when there isn’t an organised system in place for invoice management.
Payment is inconvenient for your customers
According to Statista research in January 2020, 68% of UK e-commerce purchases will be paid by e-wallet. Your customers expect to be able to pay you seamlessly using their preferred payment method.
They can’t do that with a paper invoice.
Instead, they have to manually enter their payment information, which is an undesirable experience that could lead to payment errors and delays.
Day sales outstanding is longer
All of these challenges add to the time it takes to close the sale. Bottlenecks in your revenue stream can mean a lack of funds for accounts payable and payroll.
Why spreadsheets don’t work for accounts receivable
Spreadsheets don’t offer much in the accounts receivable space for wholesale distributors. They might be easier to filter through and locate than paper invoices under stacks of files on your desk or in a file cabinet.
However, they don’t offer the smart data tools that newer software systems employ to keep wholesale distributors operating more productively and efficiently.
Here are two issues with using spreadsheets:
No inter-departmental connectivity
To keep up with the increase in accounts receivable, data needs to flow seamlessly throughout the organisation.
If sales, customer service, accounts payable and finance are each using a different system, you’re sacrificing data accuracy, security, efficiency, and transparency as that data is shared manually across the business.
Your organisation needs one data source to manage and share all data in order to easily spot opportunities and catch errors before they occur.
This kind of insight is how leading wholesale distributors remain relevant in a rapidly changing business climate.
Limited flexibility in creating invoices
It can take months to make changes to your invoice template if you are using an older software solution. This puts a limit on the accuracy and effectiveness of this important communication channel.
Also, there are no options for personalising your invoices for each customer, which is a proven tactic for improving customer experience.
5 tips to improve your accounts receivable process
The digital era offers many solutions in this space – especially for wholesale distributors – to help you keep up with industry demands easily and efficiently.
Today’s accounting software solutions eliminate the common challenges in your accounts receivable process, empowering you to pool more resources toward innovation and strategy building.
Follow these five tips so you can step up your accounts receivable process.
1. Digitise your invoices and payments
Instead of manually creating and distributing invoices, use software to automate the process once the order is complete.
Modern software allows you to create and email digital invoices, so you can easily verify which ones have been sent and to whom.
Some solutions feature a ‘pay now’ button embedded in the invoice so your customers can pay them straight away using a digital payment method.
2. Use smart data for personalisation
Today’s software extracts specific data, such as customer name and account details to include in that customer’s invoice.
This could also include special offerings such as a first time or repeat customer discount, or personalised messaging if it’s your customer’s birthday or anniversary with your business.
Personalisation is a proven way to effectively communicate the account status and take advantage of a customer experience opportunity.
3. Use automation for data entry
Accounting software eliminates manual data entry throughout the accounts receivable process.
The software automatically generates the data and calculations, which reduces human error and saves time.
4. Integrate your business systems
Automation is even more powerful when you have one single source for all of your customer relationship management (CRM), sales, inventory and accounting data.
Stakeholders across your organisation can easily share data and collaborate with better visibility across workstreams to prevent errors and seize opportunities.
5. Automate your customer communications
The automation in today’s accounting software allows you to preset scheduled communications when a customer’s payment date is 10 days away, for example.
This can help you get paid faster and keep cash flowing through the business.
Everything is digital in today’s business world and technology is making processes such as accounts receivable less of a chore.
In fact, wholesale distributors that aren’t digitising these functions usually don’t have the bandwidth to dedicate to innovation and strategy, putting them behind their competitors.