One of the key things I tell customers looking at enhancing their Accounts Receivables process is that a system is only part of the solution. Process change and new ways of working aligned to a new system can help achieve the objectives you have set. The success measure of enhancing an Accounts Receivables process is to improve your working capital, or to look at it a different way to reduce the balance within your debtor ledger. My advice to customers and consultants throughout a project lifecycle is to always focus back to the measure of success.
Before I continue, it's worth considering that some clients may look to make headcount reductions in an unproductive team, or reduce bad debt risks. Where these are relevant, they are normally secondary to improving your working capital in terms of importance and potential benefit provided to the client in the main.
The Accounts Receivable impact on working capital
The key objective of an Accounts Receivables team is to collect as much cash as possible from customers. A customer invoice will have a due date, and normally the customer will pay the invoice according this. . In some instances they will pay early e.g. if there is an early payment discount. So for a client who provides a service or dispatches stock to a customer they have to wait a period of time before getting paid. Normally the service or stock would be paid for by the Accounts Payable department of the client, and there will be occasions where these are settled prior to receiving the money from the customer. This could put pressure on the amount of available cash within the client's bank accounts as more money is going out than is coming in. In turn this could impact future growth for the client (ability to invest in capex), or lead to bank interest charges to fund the lack of available cash. The measure of the Accounts Receivable team is to influence the amount of available cash, ensuring that as much due debt is collected.
Common issues within the process
Where a customer has an issue with an invoice they will not pay the invoice until the issue is resolved. An issue or dispute could arise in a number of forms, so there could be a price issue, or a quality issue with the product/ service.
Some customers will wait until they are contacted by the client before they settle any outstanding invoices; therefore the client needs to ensure these customers are contacted to ensure payment.
Customers are normally assigned to a single person within the Accounts Receivable team to deal with any issues and to collect cash. If the team member is on holiday or off sick for a few days their workload may get overlooked impacting the amount of customers to contact.
The Accounts Receivable team will normally contact high value customers first, or maybe work down from a list sorted alphabetically. Certain customers may be overlooked leading to collectable debt not being collected.
Aligning SAP Receivables Management functionality with process issues
SAP Dispute Management is one of the core modules within SAP Receivables Management. It provides a central system within SAP ECC to record customer disputes, categorise the disputes and then to resolve the disputes. Further to this, reporting can identify any trends within customer disputes and resolution times of disputes can be recorded and measured. By being able to track and resolve disputes within a single system the time spent to resolve disputes can be reduced. In turn this will directly impact the amount of cash that is being 'collected'.
SAP Collections Management is a tool that provides a one stop shop for the Accounts Receivable team. Details of the contact by the client to the customer are automatically recorded within the tool leading to a central repository of information. Each team member and manager works through a worklist which is prioritised based on a number of pre-defined rules that are specific to the client. This ensures that the correct customer is contacted at the correct time within the chase cycle.