The Chief Financial Officer(CFO), as a key leader, rarely pops up in our heads when we think about innovative leaders in an organization. But, what we fail to realize is, the business world has changed drastically over the years.
From Gen X to Gen Z, we have seen the world boom with technology and innovation. With this constant shift, the world has seen CFOs transcending the earlier roles—from a conservative bookkeeper to a pro-active fund strategist, actively encouraging innovation as a catalyst of growth.
A CFO’s Tale: From Gen X to Gen Z
Gen X CFO’s roles were limited to maintaining the company’s books of accounts and reporting. Their roles were passive and reactive. However, with the arrival of millennials, also known as Gen Y, the traditional role of a CFO became proactive and strategic based on a set of growth expectations.
Today, Gen Z CFOs are the second most important C-suite executive, functioning as the CEO’s right hand. They have moved beyond the confines of finance, harnessing the power of data to enhance finance functions and business growth. However, to effectively play a broader role, CFOs need to overcome significant challenges.
CFO’s #1 Concern: Accounts Receivable
Over the years, accounts receivable optimization has emerged as one of the top priorities for CFOs to enhance liquidity and improve working capital. According to a study by The Hackett Group, 75% of the CFOs in various organizations have taken steps to optimize accounts receivable processes, and 79% of CFOs intend to make these changes permanent.
Today the focus of CFOs has been to secure their receivable portfolio and boost cash collection.
However, accounts receivable optimization will involve dealing with cumbersome processes that are manual, time-consuming, and costly. We have listed below the top three challenges and concerns every mid-sized company CFO needs to address as the next-level company visionary.
Lack of standardized processes
Mid-sized businesses have always suffered due lack of standardized accounts receivable processes. Determining the receivables status and the reasons for the slow collections require a lot of effort.
The absence of a strong credit management process and credit policies is an AR nightmare because not all customers will pay their debts on time. Therefore, your business needs to determine how much credit to extend to avoid bad debts and negative impact on the cash flow.
Also, with ineffective collection processes, businesses will have a hard time dealing with customers. Inefficient management of too many payment follow-ups and client disputes arising at the last minute will impact the bottom line of a business. Hence, an essential part of a CFO’s role is to minimize the impact of manual receivables on cash flow and profitability.
Labor-intensive and manual processes
Mid-sized businesses do not have advanced systems in place to monitor and track daily AR operations. As a substitute, they use free tools such as excel and spreadsheets to track invoices and payments. For most mid-sized businesses, AR processes are labor-intensive and highly manual. As a result, AR teams spend even days managing bills, aggregating remittance information, and matching invoices manually. Delay in invoice delivery due to manual processes can directly impact the timeliness for the payment to be received, damaging the overall financial health of a company.
Moreover, AR teams have to their time aggregating credit information for assessment and invoices before making a collection call. Top CFOs feel that doing mundane AR tasks is not the most productive use of their team’s time. CFOs with strategic perspective believe that investing in automation is a smart way to allow theAR team to focus high-value functions.
Most mid-sized businesses prefer in-house tailor-made solutions or legacy ERP systems to manage daily AR operations. In today’s fast-moving business climate CFOs have realized that ERPs can pose some limitations in terms of improving accounts receivable efficiency.
While most ERPs have modules for managing receivables, they lack the in-depth insight, functionality, and automation required for efficient credit and collections management. Managing accounts receivable with limited ERP functionalities can lead to higher DSO and bad debts. As a result, CFOs in the mid-market seek specialized AR automation solutions that will sync seamlessly with their existing ERP.
Digital Transformation: How RadiusOne Helps?
Digital transformation is the need of the hour. CFOs can optimize the overall finance function by automating accounts receivable. Doing so will reduce bad debts and boost working capital.
With growing industry demand and competition, top CFOs are shifting towards leveraging software-as-a-service solutions. At HighRadius, mid-market companies often reach out to us asking for help with automation and standardization of AR processes. We always recommend a scalable solution such as the RadiusOne solution as the way forward.
Enhance cash inflow with strong credit and collections processes
With the ever-changing business climate, risk profiles of customers and industries also keep changingAs a CFO of a mid-sized company, you need to constantly check the creditworthiness of your customers to avoid any loss of cash in the future.
With RadiusOne credit risk management solution, mid-sized companies can automate credit risk evaluation and credit scoring to fast-track the customer onboarding process. Moreover, with easy access to centralized credit information, credit teams can make informed credit decisions and eliminate paper-intensive processes. This can save a lot of time and cash for the company ensuring profitability and working capital requirements are intact.
Collections play a crucial role in ensuring healthy cash flow. Top CFOs believe that sales are not complete without the successful collection of the dues. HighRadius’ collection solution provides a wide range of features to help CFOs
With a prioritized worklist driven by collections strategies, collectors can easily access backup documents and follow-up with critical accounts. The solution also provides automated dunning via email with easy-to-create correspondence templates to send and track en masse collections correspondence to scale collections outreach. This saves time and operating costs and directly contributes to the long-term survival of the company.
Boost Productivity by eliminating manual intervention
RadiusOne solution provides the improved efficiency that today’s CFOs need to manage the AR teams. Easily automate the delivery of invoices via emails and A/P software to minimize operating costs. Through a self-service portal, customers can access and manage their invoices and account statements easily.
Customers can make payments in multiple formats and create disputes through the portal. This eventually gives AR teams and collections teams clarity with payments and due dates and saves them from a lot of hassle.
Also, with artificial intelligence-enabled data capture for remittances, auto-linking of payments with remittances, and invoice matching, the RadiusOne cash reconciliation solution helps minimize manual intervention and errors in the cash reconciliation process. This saves a lot of time for analysts and helps them bring in cash faster, helping CFOs reduce bad debts and free up working capital.
Integrate seamlessly with ERPs
When it comes to investing in technology and automation, top CFOs look for solutions that can integrate seamlessly with their existing ERP and other parts of the financial tech stack. While ERPs have limitations when managing accounts receivables, mid-sized businesses can easily upgrade their ERPs by integrating with Highradius’ RadiusOne AR suite.
Quick plug-and-play into popular ERPs in the mid-market, such as Oracle NetSuite, Sage Intacct, and Microsoft Dynamics, can save a lot of time and provide CFOs with interconnected systems that work in sync with each other. This will allow CFOs to have clear visibility into finance functions and plan strategic decisions as and when required.
Today’s fast-paced world demands change. To stay ahead in the competition, CFOs need to welcome digital transformation. By starting with accounts receivable, CFOs can easily automate daily mundane AR tasks and bring standardization and increased efficiency to various processes. With easy access to real-time data, CFOs can build and implement a comprehensive business road map to minimize risk and propel revenue growth.
As a CFO of a mid-sized company, here are few things you can do to help your company optimize AR processes:
- List out the issues you are facing with your AR team
- Discuss different challenges with the key personnel responsible
- Make a list of features necessary to improve process efficiency
- Talk to vendors who can help you out
- Look at the ROI for your investment
At HighRadius, we have been helping our mid-market customers in this regard. Want to learn more. You can reach out to us or get a free demo now!