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How automating debt management could help your business stay afloat in 2024

  • Written by Carl Warwick, Regional Sales Director Asia Pacific and Japan, BillingPlatform

With insolvencies on the rise, it pays to invest in technology that can help ensure you get paid.

Another day, another business going belly-up and, more often than not, leaving its creditors whistling for their money or, if they’re lucky, gritting their teeth and accepting a few cents in the dollar, several months or even years hence.

As the new year rolls on, turnaround and insolvency specialists are expecting to have a busy time of it, restructuring and unwinding enterprises that are no longer able to operate profitably.

A boom in business busts

Worrells principal Brendan Giles has predicted an uptick in activity in the current financial year, as more difficult conditions take their inevitable toll.

Factors contributing to elevated corporate insolvency appointments will include more active pursuit of debts by the ATO, the end of the post-Covid spending boom and reduced willingness on the part of creditors to make accommodations for struggling debtors.

As the economy slows, which it is doing now, we expect to see an increase in insolvencies as more marginal businesses run into difficulty,’ Giles noted in an article published in September 2023.

This coupled with the large number of insolvencies that didn’t happen over the pandemic period due to government intervention (my estimate is 16,000) means we are primed for a few years of higher-than-average insolvency appointments, particularly in the corporate space,’ he continued.

Economic angst for individuals

Consumers, too, are reportedly experiencing greater difficulty paying their bills, as Australia’s cost of living crisis continues to bite.

An analysis of Reserve Bank data by Finder late last year revealed that the value of purchases made with credit cards reached an all-time high of $34.7 billion in September 2023.

This, coupled with an increase in demand for personal loans in the same quarter, suggested some consumers were trying to consolidate their debts and keep their finances under control, Equifax general manager, advisory and solutions, Kevin James told Finder.

The fact that arrears rates were creeping up across several debt types was a sign that individuals were experiencing financial strain, James noted.

The knock-on effect of bad debts

Alas, as many leaders who’ve been in business for more than a few minutes can attest, it’s all too possible for a customer’s financial difficulties to become your own.

Cautionary tales abound, of businesses that have had their cash flow and bottom lines bedevilled after being blindsided by a barrage of bad debts.

The subsequent struggle to pay staff and bills can send otherwise profitable enterprises to the wall – and so the misery cycle continues, down and down the line.

Making debt collection more efficient

When accounts become overdue, it’s the responsibility of your accounts receivables department to handle all activities associated with recovering the money owed. However, poor debt management and collection practices can result in errors that slow the payment cycle and leave money uncollected.

If your organisation has a high volume of invoices and relies heavily on manual processes, it can be challenging for your AR team to keep on top of things. In today’s tight times, you can’t afford for them not to be.

That’s where modern, cloud-based revenue management technology comes into play – and into its own.

The automation advantage

Automating the debt management and collections process can introduce additional rigour to the revenue management journey and accelerate the pace at which customers settle their accounts, thereby mitigating the risk posed by delinquent debtors.

Choose the right revenue management platform – one that combines billing, dunning and collections in a single solution – and you’ll be able to proactively manage collections, reduce days sales outstanding and improve cash flow.

It’s an unparalleled opportunity to minimise bad debt write-offs, enhance employee productivity and improve customer satisfaction.

Indeed, a study by Aberdeen Group found that automated solutions generated a 15 per cent reduction in payment time over manual processes.

You’ll also enjoy the advantages of centralised data, enhanced ability to forecast payments and cash flow, and improved customer relations, the last courtesy of the fact that all payment related communications will be both timely and accurate.

Keeping your enterprise on sound financial footing

The next 12 months may be challenging ones for Australian businesses, as individuals and organisations struggle to keep on top of their outgoings, and slow the rate at which they settle their accounts.

Optimising debt management and collections will make it easier for your organisation to mitigate the risk this represents.

Implement an automated revenue management platform and you’ll be able to put the process on autopilot and improve your profitability and employee productivity to boot.

If strengthening your financial position is a priority this year, it’s foundation technology you need to have in your ICT stack.

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