To eke out a profit in a high-volume, low-margin business, you need to make the most of every dollar. In this context, accounts receivable (AR) can be your best friend…or your worst enemy.
Cash tied up in receivables clogs everything up: investments in inventory, staffing, expansion, etc. But, if you can find a way to streamline your AR, it opens the floodgates, leading to what we call the AR Growth Loop—a self-sustaining cycle that supercharges your business via:
- Quicker payments: Streamlined AR gets you paid faster, freeing up crucial working capital.
- Strategic reinvestment: This cash flow enables reinvestment in growth initiatives: new products, increased inventory, better operations, more marketing and sales.
- Rapid scaling: Improved cash flow drives more effective scaling, creating a virtuous cycle of reinvestment and revenue growth.
Tapping into the AR Growth Loop transforms AR from a cost center to a growth engine for your business. But realizing this potential requires a strategic approach—one that takes the unique pressures of high-volume, low-margin businesses into account.
Here are six proven strategies for making it happen.
6 strategies for streamlined AR management
1. Switch to account statements
When you’re handling thousands (or even millions) of transactions on a daily basis, tiny friction points can add up to massive inefficiencies. Individual invoices fall into this category. On their own, no big deal. Scaled up to thousands of customers each receiving multiple invoices a month, and you’re facing death by a thousand cuts. Neither party wins in this scenario—your AR team is overwhelmed, as are your customers.
If this sounds like you, consolidated account statements are the way to go. Rather than dealing with stacks of invoices, they provide one clear, concise summary of all account activity, including:
- Overdue balances: Easy to see, easy to prioritize.
- Upcoming payments: A proactive heads-up about due dates helps customers plan ahead.
- Invoice history: A detailed record of past payments eliminates confusion and reduces disputes.
Consolidated statements ditch the piecemeal approach. Faster payments, less admin.
2. Implement customer payment portals
Invoices are far from the only friction points transactional business deal with. Even worse are physical checks and manually entering ACH details for each invoice. Both are antiquated ways of getting paid. Paper checks typically cost several dollars to process, while ACH is between $0.15 and $0.25 on average.
A payment portal beats them both.
The portal advantage
Customers can use payment portals to see their full account history in one place: what’s overdue, what’s coming up, and what deserves priority. No more scrambling to find that invoice they lost track of.
They can also make quick and convenient multi-invoice payments, saving them time and administrative headaches. And because they’re not manually inputting payment details anymore, the risk of errors is drastically reduced.
These portals make life much easier for your customers, and they do the same for your staff. Accelerated collections, less manual processing work, and better transparency. Everyone wins.
3. Streamline credits and deductions
Credits and deductions can be a hassle, but they’re a fact of life in transactional businesses.
One third of B2B buyers cite a lack of personalized pricing and discount information as a major pain point in their purchasing experience.
While there’s no way around discounts, returns, and other adjustments, they don’t have to be costly or disruptive. In fact, streamlining credits and deductions can bring major benefits to your business, such as helping you identify areas where you can improve your products and services.
Clean, accurate balances mean less confusion and fewer disputes. Happy customers are less likely to complain and spread negative sentiment. And with less customer back-and-forth to deal with, your AR team has the bandwidth to focus on more strategic, revenue-generating tasks.
How to do it right
- Automate adjustments: Leverage automation tools to process credits and deductions instantly.
- Centralize communication: Keep all credit and deduction information in one accessible system for both AR and revenue teams. This prevents errors and ensures everyone is on the same page.
- Set clear policies: Establish clear guidelines for handling adjustments like discounts, returns, and overpayments. This reduces ambiguity and keeps the process flowing smoothly.
- Maintain backups: Regularly back up all credit and deduction records, including supporting documentation. This provides a readily-accessible audit trail.
4. Accelerate remittance processing
Because they have so many transactions to process, it’s common for customers in high-volume industries to consolidate payments into one lump sum that covers multiple invoices. This is great for them, but for your AR team…not so much. Manually matching these payments to their corresponding invoices can take hours, even days. Plus, it’s a breeding ground for errors.
Turns out, AI is perfectly suited to tackle this kind of task. AI can quickly parse remittance data and identify which invoices are being paid, even in massive consolidated payments. It can then automatically apply those payments to the correct accounts.
What about when remittance details are incomplete? The AI can recognize this and flag the issue, reaching out directly to your customers for clarification or escalating it to an AR staff member.
5. Bridge revenue and finance teams
Revenue and finance teams have a tendency to operate in silos. The former spends their time nurturing customer relationships and growing the top line, while the latter remains heads-down on keeping costs in check and cash flowing. In high-volume businesses, this disconnect spells trouble: missed details, overextended credit, and delayed payments.
What if you could get them on the same page? Doing so unlocks a much-improved AR process. For instance, with proactive credit monitoring, finance can alert revenue to credit limit issues before they escalate. It also means better risk mitigation, as shared data allows for quick adjustments based on payment patterns.
Bridging the gap between these two teams eliminates one of the many payment friction points that plague transactional businesses. And with the help of the right technology, just about any business can pull it off.
6. Monitor customer health
Businesses with long sales cycles have the luxury of taking stock of their customers’ financial stability between orders. That’s not the case in highly transactional businesses—you need to be doing so continuously.
Customer circumstances, even for your most stable clients, can change on a dime. While it’s rare for major events like bankruptcies to happen completely out of the blue, other issues—like downsizings, cyber attacks, cash crunches, or negative press—can emerge quickly and impact a customer’s ability to pay. And it’s easy for these warning signs to slip under the radar until it’s too late.
Proactively managing your customers’ financial health is one of the best ways to protect your cash flow. This means constantly updating Know Your Customer (KYC) data by paying attention to potential red flags. Is a long-standing customer suddenly missing due dates or paying late? Is there news of a reduction in force? Spotting signs like these early allows you to develop solutions that protect you while meeting your customers where they are. If the issues seem to be temporary, that might just be a one-time credit term adjustment. If the situation is more dire, you might resort to requiring upfront payments or pausing new orders to minimize your exposure.
AR can be a liability or a launchpad
The choice is yours: will AR weigh down your growth or propel it forward? At Stuut, we see the transformational impact the AR Growth Loop has on high-volume businesses every day. Our AI agents make implementing these six strategies painless for your team.
Want to see how it works? Let's chat.