By Tim Vine, Head of International Finance & Risk Solutions at Dun & Bradstreet

Whether it’s issues around a lack of petrol, toys or electronic chips, Brexit will continue to cause disruption for the UK’s supply chains. And, with the legalities of the trade agreement still in a state of flux, some overseas goods are likely to be in short supply in the coming months.

As if this wasn’t enough to contend with, the pandemic has continued to drive staff shortages, lead to late payments and business concerns the world over.

As it stands, every business in the UK, in every sector, is at risk of serious disruption and limited cash flow.

But businesses need something more to hang their hat on than the changing winds of the British economy – and only data will help plan for future eventualities. More specifically, receivables data and analytics can help to ensure your business cash flow is protected – even if nothing else is.

For that reason alone, intelligent receivables management is arguably a business’s greatest ally.

The financial status quo

Currently, thousands of businesses are processing payments manually, which requires lots of hours, costs and is a laborious and error-prone process for the finance department. Understandably, this approach is essential however to keep the heart of their business alive: the cash flow.

And rightly so, it’s a way for the finance team to report to the Chief Finance Officer (CFO) on customers who are making payments in a seamless and timely manner, along with assessing the risk profile of their customer base. It will help them determine how financially stable or stressed a customer is that owes them money, and can inform their receivables management strategy. This process is essential, as if businesses fail to keep their eye on their potential risk base, it may lead to them waving the white flag.

But is this labour-intensive task necessary? Is it comprehensive?

Well, this is where the benefits of intelligent and informed receivables management, informed by data and analytics, come into their own.

With reams of data to sieve through, as mentioned above, the finance team can often be left feeling bewildered. However, with the right technology and analytics in place, data can pinpoint when payments are expected – and most importantly, when there is a risk that they won’t be paid. If they aren’t being paid, the team is well equipped to tackle the situation by tracking the “time to cash” (from shipping the goods to receiving the money in the bank), enhancing their understanding of the financial health of their customers, for example whether or not they’re financially capable of making the payment quickly. For this reason, the ‘data first’ approach for intelligent receivables management is the only true way to bridge the gap from credit to cash, and reduce – and hopefully eliminate – bad debt (where the money is never paid).

Similarly, intelligent receivables management is also able to assist in the collections process: through automation. In fact, this is where businesses data becomes invaluable. Naturally, when businesses are owed money, a scramble to chase the contact for payments is often the first port of call, and when the data is segmented, differentiated and prioritised, it enables the finance team to establish exactly how much is owed and how they should be addressed. However, when dealing with collections, intelligent receivables data also allows them to quickly uncover the receivables trinity: the size of the debt, the age of the debt and how risky it has become.

Look at it this way, if you’re a business that is struggling to receive payment from a customer, intelligent receivables data can help by uncovering their financial situation, and prioritising which payment needs to be taken first and from which customer. For example, is one customer on the brink of going bust? Is it more feasible to chase customers who may owe less, but have a healthier bank balance? Is there a customer who owes multiple payments, meaning they should take precedence? These answers and many more can be uncovered by intelligent receivables data, which in turn may also help to reduce costs internally, as the efforts by the financial team are more likely to be rewarded due to the greater understanding of the situation, ultimately enabling a more focused strategy.

Looking to the future, the need for automation and effective data integration is increasing, and will be essential if businesses want to expand and grow successfully. Having a real-time view of your cash flow – both today and in the future – is a must, not a ‘nice to have’ when wanting to flourish, retain and attract new customers in the current challenging environment. Failure to monitor and consciously attend to the heart of the business may lead to many going over the trenches in the coming months.