The Evolving Role of a CFO in Today’s Business Landscape 

The past decade has witnessed a remarkable transformation in the role of the CFO. Earlier, their responsibilities were confined to managing financial operations, but now, with the growing demands of a competitive market, CFOs are expected to be strategic catalysts of company growth. They are involved in maintaining partnerships, evaluating new technological solutions, mitigating financial risk, advising the CEO, leading the finance team, and so much more.

The primary duty of a CFO remains to ensure robust working capital for the business. However, the increasing responsibilities consume an inordinate amount of their time, making it more difficult to maintain a steady working capital.   

Amidst escalating inflation and the changing dynamics of financial markets, receivables recovery has become even more challenging. With the growing priorities, the best and safest strategy for CFOs is to optimize the Accounts Receivable processes to boost cash flow.     

The question now is: Does your finance operation need AR optimization?  

Let’s start by looking at the key factors that will help determine the AR health of your business.

5 Indicators that your Business does not have a Healthy Accounts Receivable Function

• Persistent and Escalating Cash Flow Pressure   
• Revenue Leakages due to Process Inefficiencies  
• Lack of Visibility in the CFO’s office  
• Suboptimal Customer Experience 
• Talent Attrition due to Work Overload

If your business has any of these signs your AR functions have tremendous scope for improvement.  

Well, you are not alone in this.

1) Persistent and Escalating Cash Flow Pressure   

Late B2B payments not only burden the accounts receivable team but also jeopardize the financial stability of the entire company. To add to it, volatile economic conditions, marked by inflation and rising interest rates, make it further difficult for buyers to pay on time. These late payments exert mounting pressure on the seller’s cash flow. Consequently, businesses find themselves unable to settle their own bills due to significant amounts of capital tied up in outstanding receivables.    

Overdue payments are pervasive across businesses of all sizes, aggravating cash flow challenges. However, overdue payments are not always the customer’s fault. Another big reason for late payments is delayed invoice delivery and missed payment reminders by the AR team. These often arise due to the tedious and time-consuming manual process that AR teams undergo when collecting payments, leading to the oversight of high-priority accounts.   

Automating the Accounts Receivable process helps CFOs implement technology-led operations that enable automated invoice generation, real-time invoice delivery, and automated payment reminders, ensuring that customers receive invoices on time and are well-informed about their overdue payments, cash discount expiry dates, and more automated updates. AR automation reduces the likelihood of delinquent receivables and helps to maintain a steady cash flow.

2) Revenue Leakages due to Process Inefficiencies

Inefficiencies in AR management inflict significant losses and operational disruptions on businesses. Manual processes and legacy systems often serve as the root cause for this, leading to productivity loss and unnoticed revenue leakages. For instance,  

• Inaccurate Invoicing: Errors in invoicing, such as incorrect amounts, missing items, or billing the wrong customer, can lead to non-payment in many cases.   
• Improper Credit Risk Evaluation: Extending credit to customers without conducting proper credit risk evaluation based on their credit history, payment patterns, outstanding debts, and financial stability can result in bad debts that become uncollectible and get recorded as write-offs.   
• Inefficient Collections Management: Delayed or missed follow-ups on overdue invoices and improper customer communication (poorly crafted reminders, wrong tone over collection calls, etc.) can lead to customers refusing to pay. Additionally, due to the high volume of accounts, AR teams often struggle to prioritize high-risk accounts, further exacerbating the risk of revenue loss.  
• Cash Reconciliation Errors: Errors in applying customer payments to the correct invoices or accounts can result in discrepancies. The manual nature of the cash reconciliation process is time-consuming and often leads to delays, prolonging blocked credit limits for customers that potentially affect new business sales. 
• Insufficient Reporting: Lacking proper reporting and visibility into AR processes can lead to missed opportunities to identify and address revenue leakage issues.  

AR automation presents an opportunity to address revenue leaks by streamlining operations and minimizing human intervention with AI-powered automation. CFOs are increasingly embracing AR automation to address process inefficiencies and empower the finance teams to create a positive business impact. 

3) Lack of Visibility in the CFO’s Office 

With the growing amounts of data in businesses, it is difficult for finance teams to manage and create timely reports that will have all the necessary information. If finance leaders do not have quick access to receivables health and financial metrics, they won’t be able to make data-driven decisions for the business.  

For instance, without tracking key business metrics like DSO (Days Sales Outstanding), CFOs will struggle to predict how quickly the business can collect receivables. This lack of insight will make it difficult to allocate funds efficiently for business operations, as they won’t be able to anticipate potential cash flow issues. Similarly, not monitoring the CEI (Collection Effectiveness Index) can result in difficulties in evaluating the effectiveness of collection strategies and identifying areas for improvement in collections management.  

By investing in automation in AR processes, finance leaders gain access to advanced data analytics for all essential financial management data, including customer payment behaviors, employee productivity levels, and process metrics, at their fingertips in real-time. They can harness this data to track outstanding invoices, monitor payment trends, and assess the overall AR health. It empowers CFOs to make informed decisions, spot potential issues early, and proactively address them to maintain financial stability.

4) Suboptimal Customer Experience 

In today’s expanding market, customers have multiple options for a single product, making it imperative for businesses to deliver exceptional customer service to maintain their Share of Wallet (SoW) and retain clientele. Effective accounts receivable (AR) management is pivotal in this endeavor.  

Customers often face difficulties tracking their invoices and making transactions using their preferred payment methods, as many businesses support selective or very few payment options. Poor collection practices, such as excessive follow-ups, can also quickly lead to dissatisfaction among clients. Blocked credit limits for extended periods due to cash reconciliation delays restrict the customer’s purchasing power and are detrimental to overall customer satisfaction and loyalty.  

By streamlining the payment process, AR automation enhances the customer payment experience. It implements user-friendly online payment options, which increases the likelihood of timely payments. Furthermore, AR automation contributes significantly to improving customer relationships by ensuring timely invoice delivery and providing a portal for customers to track their invoices in real-time. It enables personalized communication and timely follow-up for high-risk accounts, fostering a sense of value and appreciation among customers. With 100% straight-through-cash posting directly to ERP, it eliminates all cash reconciliation delays, enabling the instant release of credit limits. This emphasis on customer-centric AR practices drives CFOs to increasingly leverage AR automation, recognizing its role in bolstering customer satisfaction and maintaining a competitive edge in the market.

5) Talent Attrition due to Work Overload

Talent attrition is accelerating in the United States’ financial services segment, driven by perceptions among industry professionals that finance careers demand long working hours and have very few interesting day-to-day tasks. These perceptions are formed mainly due to the traditional finance operations relying on outdated systems and manual, time-consuming activities.    

Employees often find themselves overloaded with work, spending considerable time reconciling payments or following up with customers to collect dues. Employees believe this hinders their skill development and professional growth. Talent retention is a top priority for finance leaders, and nowadays, CFOs have started taking proactive measures to combat this situation. However, it is currently difficult for small and mid-sized businesses to hire new people because of labor shortages and higher wages.  

CFOs are leading the charge by updating financial management systems and embracing AR automation. This digital transformation of the CFO’s office improves employee satisfaction by freeing up their time for strategic tasks and fosters an environment conducive to talent retention and professional development.

The CFO’s Checklist for Finding the Right AR Automation Partner

• Seamless integration with existing ERP 
• Customization ability to fulfill specific requirements 
• Fast and smooth deployment 
• Extensive off-the-shelf feature sets to automate AR tasks 
• Advanced AR analytics and dashboards  
• User-friendly interface 

The right AR solution partner will check all these boxes.  

Finance leaders face the challenge of selecting the right AR solution partner amidst a crowded vendor market. The key factors outlined in this checklist play a critical role in successful AR process optimization. With a strategic roadmap and a reliable AR automation partner, CFOs can navigate the evolving demands of the finance landscape, driving sustainable growth and competitive advantage. 

At Global PayEX, we optimize the Accounts Receivable processes using our AI-powered automation solutions which helps businesses to drive 1 – 4% revenue enhancement. Talk to our experts to see our solutions live in action.