Frost & Sullivan: It Has Become Critical for B2B Businesses to Adopt Automated A/R Collection Solutions

An advantage in securing cash flow is the difference between ensuring business growth and a gradual decline in market share. B2B businesses are using Automated A/R Collection Solutions to gain this very advantage and navigate the risks of today’s market.

An Automated A/R Collection Solution engages clients in order to collect their overdue invoices. Imagine having an intelligent and automatic tool that reminds your customers to pay, that can deal with high invoice volumes, and that makes it a priority to strengthen your relationship with your customers.

Today, this solution is critical because of the economic reality created by the international pandemic and because we are now entering into an automated era in financial management that has gained exponential traction across industries. Companies providing this solution such as Gaviti are creating true resilience for their customers.

Atradius, a leading credit risk firm, states in its latest U.S. payment practices report that “U.S. firms show a business environment strained by cash flow and liquidity issues”, as well as “a significant deterioration of B2B customer credit risk with a staggering 72% year-over-year increase in invoice payment defaults.” Furthermore “suppliers polled reported that 43% of the total value of B2B credit sales is overdue. This rise is in large part attributable to an increase in the amount of long overdue invoices (still unpaid after  90 days past their due date), the total value of which rose to 16%, up from 10% one year ago.” In addition, firms surveyed report “a fourfold increase in the total value of write-offs of uncollectable receivables, rising to 4% from 1% last year.” Concurrently, there is a “year-over-year 32% increase in businesses stating they needed to delay payment to their suppliers due to late payments from their customers” and a “41% increase in respondents who said their B2B customers use outstanding invoices as a form of short-term finance.”

All of these factors have increased day sales outstanding or DSO by a number of weeks and it has become clear that companies are sacrificing investment in their own growth and instead using their capital to make up for cash flow that is not coming in on time from customers or not coming in at all.

There is a great call to remedy this issue. Andreessen Horowitz, one of the most well-known VC firms in Silicon Valley, released an article stating that “in the current economic crisis, businesses have been forced to make difficult decisions around resource allocation and cash flow planning. Now, as fintech and enterprise entrepreneurs team up to tackle these long-standing pain points, software innovation is finally reaching the finance suite.”

Andreessen Horowitz contends that “Data is stale, limited, and hard to access. An enterprise resource planning (ERP) system, the central repository for financial data, is primarily designed around accounting. As a result, it only gives finance teams a backward-facing view, typically two or more weeks after the month’s end. With that lag, the CFO often has difficulty assessing cash burn, revenue, or expenses in real-time. It goes without saying that, particularly now, most companies can’t afford to wait six weeks to figure out when they are going to run out of cash.”

Due to their ability to answer this call, automated A/R collection solutions such as Gaviti have exponentially increased their customer base and are strengthening SMEs and enterprises leveraging their solution. Due to their holistic and sophisticated approach, Gaviti is an exemplar of the type of partner that can successfully propel B2B companies into this new era. Their solution offers a crisp and clear picture of all receivables so that businesses can stay efficient and resilient into the future. They are backed by a strong engine that takes advantage of the enormous amounts of proven collections workflows that are constantly being tested and improved so that you do not need to try what methods work best to get paid. Collections methods are efficient and automatic from day one.

This type of sophistication, transparency, and automation is what allows companies to stop dealing with monotonous collections procedures and to evolve to the next level. The corporate finance team at the TWE Group shared that “The automated workflow has reduced our workload and made our communications with our customers more consistent. Even in the midst of the worldwide pandemic, our collections and aging have improved.” In 6 months, the Burwood Group was able to reduce its receivables at risk or RAR by 77% and the number of overdue invoices by 60% – a huge accomplishment in a very short time. We consistently see DSO falling significantly for the Gaviti customer base.

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Frost & Sullivan is witnessing strong adoption of Automated A/R Collections Solutions across a huge variety of B2B industries from manufacturing and logistics to consulting and accounting and all the way through to technology companies. Adoption leads these businesses to get paid way earlier than they would otherwise, which creates a stronger more stable business that can invest in itself and that will be able to withstand the challenges and risks of tomorrow. Frost & Sullivan believes that the adoption of Automated A/R Collection Solutions is an essential component in managing receivables and ensuring stability.

Frost & Sullivan is a global strategic and financial consulting firm. Over the past six decades, Frost & Sullivan has become world-renowned for its role in helping corporate leaders, investors, and governments navigate economic changes and identify disruptive technologies and new business models resulting in a continuous flow of growth opportunities to drive future success. Today, more than ever before, companies must innovate, not only to survive, but thrive in the future. We provide service to 10,000+ clients worldwide, including emerging companies, SME, the Global 1000 and the investment community.