Revenue Analysis Can Benefit Your Business

4 Ways a Revenue Analysis Can Benefit Your Business

No one likes to work on the premise of lowered expectations.  It goes against the grain of competitive business.  But the reality is that business works on a curve.  Customers fit somewhere along that curve, and at any given time, they can be rising above or dropping below the ideal arc.  If your finance department can tell at a glance how much a customer has spent, and how much that spending has made for the business, then huge headway has been made and many misfortunes have been headed off.  Why make Finance manually calculate who gets orders shipped on credit?  Know with certainty with a few clicks when a customer pays late, on time, or even early. Arm yourself with the software tools to know who has been naughty or nice, who is in it for the long haul, and who is just out to cop Santa’s milk and cookies.  Here are 4 ways a revenue analysis can benefit your business:

Accounts Receivable Automation

The Undisputable Benefits of Accounts Receivable Automation

As the publishers of Anytime Collect accounts receivable management software, we’ve written countless articles explaining the need for and the benefits of credit collection software. But even we know that real results experienced by real companies are the best way to truly illustrate how accounts receivable automation can help you increase cash flow. Take, for example, the recent case study published about an HVAC equipment distributor who reduced days sales outstanding by 30% and all but eliminated bad debt after putting accounts receivable on auto-pilot.

The Problem: This distributor was experiencing a problem many companies will recognize, cumbersome manual processes that led to high DSO and a significant amount of cash tied up in outstanding receivables.

In short, the company was relying on the basic features in their ERP system to manage invoice collection. This was a tedious and time consuming process that involved a combination of their ERP system, aging reports, and other manual processes. With so much time being spent on administrative tasks, looking for information, and rekeying data, collectors had little time to devote on proactively contacting customers about invoices.

Accounts Receivable Metrics

Accounts Receivable Metrics You Should Be Tracking

Collecting debt from clients can often be a difficult task. No matter what you do, it is not fun and tends to only get serious attention when cash flow is needed or after everything else is done.  Invoice payment is the final step in the sales process and should be planned.  The longer an invoice goes unpaid, the less likely you are to receive payment. Below are some key metrics to track when managing accounts receivable and planning to receive payments on invoices.

Days Sales Outstanding (DSO)

DSO indicates the average amount of days it takes your company to collect funds after a sale has been made. The lower the DSO is, the more cash is available for business to reinvest in marketing, sales and operations.  Reducing DSO is one of the largest challenges for many businesses due to the company-wide strategy that’s necessary to do so.  With improved DSO, a business’s cash flow increases significantly, allowing for funds to be allocated to growing.  One simple method to reducing DSO is converting paper to email with electronic invoicing, which also reduces labor and material costs.  Businesses can often reduce the collection cycle by 2-6 days after implementing electronic invoicing.  Another strategy includes sending triggered reminder letters.  In most occurrences, clients do not decide to avoid paying an invoice – they have just simply forgotten.  This is the major challenge associated with reducing DSO.  Electronic invoicing and reminder emails can greatly assist in overcoming this challenge.