2016 B2B BILLING & COLLECTIONS GUIDE

A Guide for Accounts Receivable Professionals

Takeaways from Our Benchmarking Survey9 ½

INTRODUCTION ABOUT THIS GUIDEToday’s financial professionals are always looking for new ways to deliver added efficiencies and cost savings to their accounts receivable (AR) processes. This Billing & Collections Guide offers an opportunity to do just that — by providing the most meaningful data possible relating to the current state of AR within the B2B space.

The 2016 B2B Billing & Collections Guide was created by TermSync, an Esker company and leader in cloud-based AR software technology. TermSync composed this guide by conducting surveys and interviews of U.S. Credit and Finance professionals, and combined our findings with other relevant industry studies.

A lot of interesting and pertinent data was collected during this process; however, for the benefit of our readers, the findings of the 2016 B2B Billing & Collections Guide have been narrowed down to the 9½ biggest takeaways relating to invoice delivery, collections management and customer experience.

TAKEAWAY #1 PERCEPTION ISN'T REALITY WHEN IT COMES TO CUSTOMER EXPERIENCE.

In regards to the level of support offered to customers, 63.4% of survey respondents believe that the support they provide their customers is something that differentiates them from competitors. However, despite this optimistic conjecture, only 26.3% of the same survey respondents actually offer an online portal where customers can ask questions, apply credits and view invoices.

Why is this gap significant? Because it directly contradicts the expectations of today’s customers. For example, the results of a recent consumer study conducted by Nuance Communications found that 2 out of 3 customers actually prefer a self-service option (such as an online portal) over speaking to a person for customer service inquiries.1

63%

Of course, not all customers will use a portal, but the percentage of those that do is too significant to ignore. Over 70% of respondents that offer a portal say they have 15% or more of their customers actively using it; and 35% have at least 40% of their customer base using the portal.

26%1 The Tide Has Turned: Nuance RESEARCH FINDS Most Consumers Would Rather Self-Serve Over Speaking with A Live Agent. (2012, May 10). Retrieved from http://www.nuance.com/

company/news-room/press-releases/Media-Advisory-Self-Service_Web.doc

SAY CUSTOMER EXPERIENCE

DIFFERENTIATES THEIR

COMPANY FROM COMPETITORS.

YET ONLY

OFFER AN ONLINE PORTAL.

TAKEAWAY #2 THE USE OF E-INVOICE DELIVERY IS ON THE CLIMB.

When compared to sending invoices electronically, invoices sent via postal mail are by far the more expensive delivery option. In addition to the hard costs incurred (e.g., postage, paper, ink, envelopes, etc.), companies also shoulder the expense of needing someone to organize the documents, stuff the envelopes and more. It’s also worth noting that mailed invoices take longer to reach the customer (even longer if they’re lost on the way), which can delay payment even more.

It’s promising, then, when evaluating the survey results related to this issue. A majority of respondents (59.6%) prefer email for sending their invoices, over direct mail, fax, hand delivery and EDI. Compare that to the results of last year’s B2B Billing & Collections Guide, which found that only 41.3% of respondents were sending their invoices via email.

3 IN 5RESPONDENTS

PREFER EMAIL FOR SENDING THEIR

INVOICES.

TAKEAWAY #3 THE ADOPTION OF AR MANAGEMENT SOFTWARE CONTINUES TO LAG.

Only 15.4% of respondents say they use a third-party software system to help manage their AR — and no — Excel does not count as an AR management system. Compare that to the 83% of companies whose sales teams use CRM software solutions to help better manage their workflow.2 Based on these results, it’s clear that AR continues to be a laggard when it comes to adopting modern management systems and processes.

The lack of adequate management tools in AR means staff members are using a cobbled together collection of Excel sheets, printouts, Outlook reminders and other items. This leads to inefficiencies, lack of accountability and overall poor performance.

2 The Adoption Rate Challenge. (2014, March 1). Retrieved April 7, 2015, from http://www.destinationcrm.com/Articles/Columns-Departments/Reality-Check/The-Adoption-Rate-Challenge-94828.aspx

15%ONLY

USE A THIRD-PARTY AR MANAGEMENT

SYSTEM.

TAKEAWAY #4 COMPANIES ARE LAX IN THEIR ENFORCEMENT OF CREDIT LIMITS.

In the 2016 B2B Billing & Collections Guide, only 52.9% of respondents say they enforce credit limits; compare that to the 2015 survey, in which 64% of respondents claimed to enforce credit limits. This relaxation in credit limit enforcement could be the result of the increasing pressure on companies to grow sales even if it means credit rules are decreased — all the more reason to have a solid collection process.

Whatever the reason for overriding credit limits may be, one thing is clear: Failure to shore up your collections process can lead to bad credit risks and increased losses down the road.

53%OF RESPONDENTS

SAY THEY ENFORCE CREDIT

LIMITS.

ONLY

TAKEAWAY #5 INSTALLMENT PLANS ARE COMMON.

Of all the respondents surveyed, 65.8% work out flexible payment arrangements with customers, primarily installment plans. Most companies know it is better to work with the customer instead of against them — at least until it’s absolutely necessary to send them to collections.

These companies are not doing this for the majority of their customers, in fact, most do less than 10 per month. However, it does create manual inefficiencies, and the installment plans are often undocumented and managed through email reminders or sticky notes. AR management solutions can automate these while maintaining flexibility for the customer.

66%ARRANGE

FLEXIBLE PAYMENT PLANS FOR

CUSTOMERS.

TAKEAWAY #6 THERE ARE MANY MISSED OPPORTUNITIES IN THE COLLECTIONS PROCESS.

Nearly half of all survey respondents (45.2%) say they don’t follow up at all with customers until at least 20 days past due. Furthermore, only 9.6% follow up on or before the due date. Failure to engage in these type of communications represents a huge missed opportunity. Sending a friendly payment reminder early in the process helps verify that there are no questions, and ultimately leads to faster payments, fewer calls, etc.

Frustratingly, this is one of the easiest issues for a company to address. Automation solutions can be set up to send out scheduled, customized payment reminders or account statements, freeing up your staff to focus on more business-critical and value-added activities. Companies understand that the collection process can’t be automated in its entirety, but it’s hard to deny that at least parts of it should be — whether that is creating the statement, printing a document, sending an email, etc.

45%DON’T FOLLOW

UP UNTIL AT LEAST 20 DAYS

PAST DUE.

TAKEAWAY #7 STAFF TIME ISN’T ALWAYS BEING SPENT WISELY.

Today’s competitive business environment demands that processing activities be value-added as much as possible — wasted time and energy is wasted money. Unfortunately, AR appears to once again be behind the times in this regard. The 2016 B2B Billing & Collections Guide found that about half of the respondents (51.3%) say that their collection notes are stored in an accounting system. It’s important to note that accounting systems are not designed for collections management. Combine the percentage of companies who are storing them in a shared document (13.6%) or personal document (7.5%), and it’s easy to see why time is being wasted.

3 AR Automation: Taking Control of Collections & Recovery. Q4 2014. PayStream Advisors.

51%STORE COLLECTIONS

NOTES IN AN ACCOUNTING

SYSTEM.

Another number worth considering is the high percentage of respondents (69.7%) that claim to have no method of prioritizing which customers to call. This is not surprising, since research shows that, in a manual collections environment, the average AR staff member spends about 30% of his/her time on prioritizing who to call and call preparation.3

70%HAVE NO METHOD FOR PRIORITIZING

WHICH CUSTOMERS TO CALL.

TAKEAWAY #8 COMPANIES ARE FAILING TO LOOK INTO METRICS BEYOND DSO.

Due to the fact that that so many AR departments don’t use software to help manage workflow and measure performance (see takeaway No. 3), this often means they’re only tracking a handful of metrics (e.g., DSO, how much was written off, etc.).

Case in point: Only 25.9% of respondents say they measure response time to customers. As the old adage goes, you can’t improve what you can’t measure. Even if your team is trained to respond in a timely manner, there’s no way to tell how many requests are coming in and if they’re being addressed with urgency. While DSO is an essential metric, companies can and should go deeper. Not only does tracking critical metrics such as response time, invoice received, collection calls and more help to evaluate the team’s performance as a whole, it also facilitates accountability at the individual level.

26%MEASURE

RESPONSE TIME TO CUSTOMERS.

ONLY

TAKEAWAY #9 COMPANIES HAVE THEIR REASONS FOR AVOIDING AR AUTOMATION …

According to respondents, cost is the No. 1 reason preventing them from having an AR automation solution (31.7%). On the surface level, this makes sense — purchasing and maintaining a new solution can be a significant expense. However, when examined more closely, that argument doesn’t really hold any weight (as detailed in the next takeaway).

Not far behind cost, the No. 2 reason has to do with higher priority projects taking precedent (31.3%). Again, this is understandable on the surface, as budgets are tight and getting projects approved can be difficult. The question is, what business functions trump customer experience and cash flow in terms of importance?

31.7%

COST

31.3%

CURRENT PROJECTS

WITH HIGHER PRIORITY

TAKEAWAY #9 ½ … BUT THERE’S REALLY NO GOOD REASON TO DO SO.

It’s true: AR automation might not be a good fit for every company. However, considering how many AR departments are still using outdated, inefficient processes, there’s never been a better time to explore your options.

It used to be that only larger enterprises with the cash and resources to spare could pursue a transformational investment like AR automation. Today, cloud-based solutions make it possible for organizations of any size to reap the benefits. With no new hardware or software investments, large upfront fees are avoided, as are the headaches of future upgrades. Best of all, the solution can often be up-and-running in a matter of weeks. Couple that with the myriad of short- and long-term benefits of automation, and the ROI is undeniable.

Companies simply need to be honest about their own AR process in terms of efficiencies compared to other departments, and whether they are truly meeting or exceeding customer expectations (or simply claiming to). After all, it is 2016, and it’s a safe bet that 10 or 20 years ago nobody thought many of these inefficiencies would still exist.

AR

ABOUT TERMSYNCTermSync is an Esker company that connects over 500,000 businesses through an intuitive, cloud-based platform. Operating in tandem with existing workflows and systems, TermSync helps organizations of any size improve customer relations, reduce administrative costs and get paid faster — it’s our commitment to bring AR into the 21st century!

TermSync is headquartered in Madison, Wisconsin. For more information, visit www.termsync.com.

Esker, TermSync’s parent company, is a worldwide leader in cloud-based document process automation software.

Founded in 1985, Esker operates in North America, Latin America, Europe and Asia Pacific with global headquarters in Lyon, France, and U.S. headquarters in Madison, Wisconsin. For more information, visit www.esker.com.

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