5 Proven Strategies for Boosting Accounts Receivable Turnover in Procurement
As a procurement professional, you know that managing accounts receivable turnover (ART) is critical to your success. After all, the faster you can collect payments from your customers, the better cash flow and profitability you’ll enjoy. But achieving an optimal ART ratio isn’t always easy – it takes effort to ensure timely payments while maintaining positive relationships with clients. That’s why we’ve put together this guide on 5 proven strategies for boosting ART in procurement. Whether you’re new to the field or looking for ways to improve your existing processes, read on for some valuable insights!
Accounts receivable turnover (ART) is critical for procurement success
For procurement professionals, accounts receivable turnover (ART) is a crucial metric for measuring the effectiveness of their collections efforts. Essentially, ART represents how quickly a company collects payments from its clients over a given period. A high ART ratio indicates that payments are being collected quickly and efficiently, while a low ratio suggests potential issues with invoicing or collections processes.
But why is ART so critical to procurement success? For starters, it directly impacts cash flow – the faster invoices are paid, the more money you have on hand to invest in your business. Additionally, maintaining a healthy ART ratio can help build trust with suppliers and vendors by demonstrating financial stability and reliability.
Yet achieving optimal ART isn’t always straightforward; it requires careful attention to detail when creating invoices and following up on late payments. That’s why having effective processes in place for managing payment collections can make all the difference in ensuring long-term success for your organization.
5 strategies for boosting ART
Boosting accounts receivable turnover (ART) is crucial for procurement success. The faster you can collect payment, the better your cash flow and profitability will be. Here are five strategies to help boost ART:
1. Invoice promptly and accurately
The sooner you send out an invoice, the quicker you’ll get paid. Make sure that your invoices are accurate with no errors or discrepancies that could delay payment.
2. Offer incentives for early payment
If customers pay their bills earlier than expected, offer a discount or other incentive as a reward. This encourages prompt payments and helps boost ART.
3. Follow up on overdue payments
Don’t wait until it’s too late to follow up on overdue invoices; act quickly to resolve any issues before they escalate further.
4. Use automated reminders
Automated reminders can help reduce manual effort while keeping customers informed of upcoming due dates without fail
5.
Utilize dynamic discounting
Dynamic Discounting makes it easy for companies to earn savings on purchases by paying suppliers ahead of schedule using available cash reserves
By implementing these strategies, businesses can improve their ART rates significantly which in turn will benefit all aspects of their business including procurement & inventory management
The right mix of automation and human intervention
When it comes to boosting accounts receivable turnover in procurement, finding the right mix of automation and human intervention is crucial. While automation can streamline processes and reduce errors, human intervention provides valuable insights and personalized solutions.
One way to achieve this balance is by automating routine tasks such as invoicing and payment reminders. This frees up time for your team to focus on more complex issues like dispute resolutions or negotiating payment terms.
However, it’s important not to rely solely on technology. Human intervention can provide a personal touch that builds relationships with clients and suppliers. For example, a phone call from an accounts payable representative can often resolve payment delays faster than an automated email reminder.
Another benefit of combining automation with human intervention is improved data accuracy. Automation reduces the risk of manual entry errors but humans are still needed to verify data completeness and correctness.
Ultimately, the right mix of automation and human intervention will depend on your specific business needs and goals. By assessing which tasks would benefit most from automation versus those that require personal attention, you’ll be able to create a strategy that maximizes efficiency while maintaining strong customer relationships.