Building an effective AR strategy helps to drive performance and results at the individual contributor level and is critical to maintaining strong metrics. Let’s face it, accounts receivable is unique to every company. Interactions with various departments, contractual agreement variances and resolution complexity vary from company to company and what fits one business, may not work for another.
Designing an effective AR strategy starts with “bucketizing” the portfolio into manageable segments. I usually look at which accounts make the most impact financially first, then start dissecting by account or transaction volume, either across the entire portfolio or specifically on the aged receivables. Once you understand the risk exposure for each bucket of the portfolio, you can start to lay out strategies to work each segment. High volume, smaller value accounts may be much less complex than larger customer relationships and require a high productivity approach, whereas a larger customer relationship such as a Wal-Mart or Target, may require a much more focused approach, working at the transaction level to maintain the aging.
AR Strategy is enhanced by consistency of approach. Process standardization is also extremely important. Our Global Process Model® creates one standard approach for performing every task associated with the Order to Cash Process. Rather than have home grown AR processes, created by AR agents and driven by customer behavior and necessity, Global Process Model® focuses on productivity improvement, process standardization and coordination of approach throughout the entire O2C cycle.
Whatever you decide, it’s important that you stick with it. Process standardization, controls and AR strategy are all important aspects of creating an effective AR approach. These items can only work if maintained long term. In the short term, they may appear that the approach isn’t working, but once you start to turn the corner, the receivable will fall in line, the customer relationships will improve and, most importantly, performance metrics will improve.