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Receivables management rethought
Stable liquidity through targeted reporting
The supplier's liquidity was becoming increasingly strained. At the same time, the reporting did not provide the creditors with the transparency they needed to identify the causes. On the advice of a creditor, I was tasked with improving the transparency of the figures and external reporting.
In addition to some other internal negative developments, it also became apparent that Receivables management was not getting the necessary attention from management.
Clear processes for better results
The company had no dedicated accounts receivable managers. There was no regular reporting on the age structure of accounts receivable. Discussions on demands only took place ad hoc and in individual cases. Surveys of various departments on the reasons for the high volume of overdue receivables gave the impression that the company's warranty was mainly not working.
In the reluctantly accepted workshop with an interdisciplinary composition (sales, service, design, production, etc.) , every single overdue open item was discussed. Even in the first workshop, a somewhat more differentiated picture of the causes emerged. From outstanding subsequent deliveries to missing documents, missing, dongles and warranty issues the causes were broad and scattered across several departments.
While the first workshop lasted several hours, the time required for the workshops, which now take place every 14 days, was reduced to one to two hours. The measures discussed in the workshops to recover overdue receivables also meant that work on new orders was much more targeted, so that a receivable did not become overdue in the first place.
Courteous managers and clear escalation paths
In the accounts receivable management department, accounts receivable managers were established who were able to act accommodatingly within a defined framework. Accounts receivable managers and all levels above them were familiarized with the internal and external escalation principle . Management adopted the principle that full receipt of overdue receivables takes priority over accepting new orders.
Logging and improved receivables collection
All measures relating to an overdue receivable, such as telephone calls, emails, etc., were logged in the event of an external escalation. The contact details of the persons responsible for settling the invoices have now also been stored in the customer master data.
The improved receivables collection also led to an improved equity ratio by shortening the balance sheet. The effects were also visible in cash flow, liquidity and the banks' statements on the utilization of credit lines.
Clear guidelines instead of external partners
After the management recognized the importance of effective receivables management, they considered outsourcing this function to an external partner. However, they were persuaded that with clear guidelines in place (which were documented in writing), their own employees could achieve the same results at a lower cost.
The systematic management of receivables released the liquidity that was initially sought from lenders, in this case, EUR 5.0 million.
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