Standing capital is one of the major concerns for business owners today. These include unpaid invoices or payments that remain pending from customers or suppliers. Prolonging this could increase debt, lead to financial complications and in some extreme cases lead to closing down a business. However, one of the best tactics to deal with this problem is through Enterprise Resource Planning (ERP) systems which offer businesses a better understanding of their cash flow and receivables.

ERP systems do much more than help run various processes within the business, they can also help to revive unpaid debts and improve the cash inflow. Here is how:

Customer Background Check

Checking a customer’s credit score and their status in the market can be done before updating their credit. With an ERP system, businesses can gather all necessary customer information and run a comprehensive background check on the customer’s credit score and their business reputation which eliminates risk by not allowing certain customers to purchase using credit.

Stuck Payment Tracking

ERP systems can track payments in real-time. Overdue payments from customers gets flagged and new customers flagged as unpaid get tracked. These measures help the company’s payment collection process get more efficient as they aim to avoid bad debts.

Credit Policy Implementation

To achieve greater cash inflows and optimize payment collection, a business needs to implement a sound credit control policy. Businesses using ERPs can easily set up customer internal credit scores to automate internal audits and set up the credit control system which helps reduce the default risk.

Sales Process Improvement

Having an effective ERP system integrated helps the sales team to know a customer’s payment history. If a customer is a frequent late payer, the sales team can use this information to strategize their approach to such customers. For example, offering early payment discounts to get unblocked funds faster can solve the delay of payment issue.

Automated Follow-Up and Reminders

Automated communication enhances efficient document filing, particularly where payments are concerned. With ease, reminder notifications can be disseminated to the concern personnel automatically by the ERP, ensuring they track other pending payments. More advanced systems even automate the reminder call feature, ensuring clients who default on their payments are sent a personalized notification. The systematic approach taken in this feature automates fussing in the follow up process and saves your accounts receivable team hours of stress.

Cross-Departmental Connectivity

Managing a business is complex, but the biggest benefit ERP brings is the unprecedented convenience of connecting all internal departments under one umbrella. For example, the moment a defaulting customer attempts to circumvent one department in order to avoid paying their debts, the relevant departments are instantly alerted through an automated notification. This insures that reminders for payments are always set before any other service is performed, thus solving the problem of cash collection delays.

A Massive Action Plan for Managing Stuck Capital

Instructional technology based on an ERP system that is intended to capture idle capital is notoriously tedious, making it harder for businesses to pursue rendered services. For companies to maximize the benefits of an ERP system, here’s a Massive Action Plan to minimize workloads from unpaid invoices.

Assess Outstanding Payments:

The first step should be to go through all new accounts and identify which owe money to the company and which do not.

Tracking Who Owes Money and How Much:

Construct a register of customers who have debts against their names.

For every customer on the list, list how much you might need to recover as well as prioritize the client’s from which it would be easiest to recover money.

Do the Above for the Following Payment Gaps:

Measure the time lapse between owing the payment and when it was cleared, if at all.

To make sure payments do not further lapse in delay, focus on collecting older payments first, as these can result in severely impaired debts.

Keeping Business Discipiline:

Approaches that have a comprehensive method for managing credit… should exist; rules for supplying goods and services along with the associated expected payment have to be reasonable and rational. This should be one of the forms of rules of credit policies of an organization and be consistent with the discipline of all units of work in the firm.

Final Note:

It’s not only easier to collect debts, but they will also aid companies in managing their cash flows accurately. Monitoring payments due and unpaid, along with automatic gentle nudging (reminders) and analyzing the clients’ activity helps one to see sharper balance sheets. Having reminders makes it less likely that your customer will forget to settle their payments. Using a cash management action plan helps earn money instead of losing it from unmet payment requirements. Cash will be gained instead of spent trying to recover unpaid debts. This leads to enhanced cash flows along with increased returns over time.

Categories: Enterprise Resource Planning (ERP)