70% of CFOs Say Making AR Processes Transparent Would Boost Customers’ Lifetime Value

Simple mistakes such as an incorrect billing address or pricing selection can slow down payments from B2B customers and cause devastating cash flow issues.

When businesses’ accounts receivable (AR) procedures and other accounting processes are opaque, it is difficult for AR departments to pinpoint those errors. When procedures are transparent, on the other hand, problems can be quickly corrected.

For that and other reasons, 70% of chief financial officers (CFOs) say that making AR processes transparent would boost customers’ lifetime value, according to the August/September 2021 Working Capital Playbook, a PYMNTS and YayPay collaboration.

See also: AR Transparency Is Key to Curbing Cash Flow Issues 

“It’s all about transparency and consistency,” Anthony Venus, chief strategy and product officer, accounts receivable automation at Quadient, told PYMNTS.

Improving the Customer Experience

Venus explained that when the AR process is clearly defined, internal teams can understand each step and manage customer expectations. Similarly, when a consistent process is established with customers, ambiguity is eliminated and expectations are set.

“The AR team needs to have a clearly defined workflow, and the customer must be kept informed,” Venus said. “This prevents confusion and frustration, and ultimately improves the customer experience and increases the longevity of the relationship.”

AR transparency also makes it easier to spot errors, which is important because mistakes can add days to the time it takes to receive payment, reducing cash flow. What’s more, when errors are spotted by the customer, they create a negative experience.

In fact, 72% of customers reported that they would abandon a brand after just one negative experience, such as a payments complication resulting from an unclear AR process.

“To mitigate this, companies need to automate processes where keying errors take place,” Venus said. “Establishing systems that make it easier to identify where errors take place, such as tracking credit reasons or types, can help identify where the process is broken and inform what solution is required.”

Establishing Clear Metrics

When upgrading AR systems to implement transparent processes, the first step is to establish clear metrics to determine the success rates for AR departments and the business as a whole, and then to display these metrics via dashboards, reports and other data displays.

These measures allow AR teams to easily identify the strengths and weaknesses in their software and human efforts, pinpoint and address processes that go wrong, and leverage the lessons learned from positive developments.

The other major step in improving AR transparency is allowing customers to access their accounts via online portals. This enables them to view invoices anytime, flag potential payment issues and pay using electronic channels.

These portals can help customers diffuse any issues before relationships are damaged, and can encourage positive dialogue between firms and their customers.

Focusing on Value-Added Tasks

Taking these steps and improving transparency can lift not only companies’ accounting departments, but also their organizations as a whole.

In addition to improving accuracy, digital payments and automated processes also boost efficiency by removing a lot of the manual tasks that AR teams had to complete to process, apply and reconcile payments.

“These two benefits are critical for an effective AR process, as they elevate not only performance, but also the customer experience,” Venus said. “Teams have become leaner and can manage more work with [a lower] headcount, and they have the capacity to focus on strategic, value-added tasks rather than low-value activities.”