47% of CFOs Say Clearer Receivables Processes Boost Customer Lifetime Value

While chief financial officers (CFOs) have many reasons to upgrade their accounts receivable (AR) systems, more than half of them cited more transparent processes as a primary motivation.

In fact, 70% said that making AR processes more transparent would boost their customers’ lifetime value, and 47% said that making AR processes more understandable would do the same, according to the Working Capital Playbook, a PYMNTS and YayPay collaboration

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“It’s all about transparency and consistency,” Anthony Venus, chief strategy and product officer of Accounts Receivable Automation at Quadient, which acquired YayPay, told PYMNTS. “The AR process must be clearly defined so that internal teams can understand each step and can effectively manage customer expectations.”

Building a Transparent Process Both Sides Can Trust

This is becoming increasingly important as more and more firms migrate to online marketplaces.

See also: Alibaba’s John Caplan Says the Age of the B2B Digital Marketplace Is Upon Us

Companies should strive for more transparency because it fosters trust with business partners, Jeff Rechtzigel, vice president and general manager for the retail division at Liquidity Services, told PYMNTS.

“We want our sellers to be confident that they’re going to receive payment for their goods in a timely manner,” he said. “And we want our buyers to be confident that they’re going to secure the volume and type of inventory that they’ve paid for. It’s a transparent process that both sides can trust.”

The lynchpin to accounting transparency is keeping both buyers and sellers constantly informed via detailed invoices and receipts. A healthy information flow ensures that everyone in the transaction process, including in-house account staff, are on the same page, reducing the risk of errors.

“Buying customers are provided detailed invoices that include their transaction amounts, shipping costs and any taxes,” Rechtzigel said. “Our sellers can then see their settlement information through software that we provide to support transparency in the process.”

Implementing Transparency Initiatives

Implementing transparency initiatives is much easier said than done, but organizations are taking steps to do so. The first step is establishing clear metrics to determine the success rates for AR departments and making them visible via dashboards, reports and other data displays. These measures allow AR teams to easily identify the strengths and weaknesses, enabling them to pinpoint and address processes that go wrong and leverage the lessons learned from positive developments.

The other major step in improving AR transparency is allowing customers to access their accounts via online portals. This lets them view invoices anytime, flag potential payment issues and pay using electronic channels. These portals can help companies defuse customer issues before they damage relationships, and they encourage positive dialogue between firms and their customers.

Creating smooth AR processes is often difficult, and companies need not make their work even more challenging by sticking with opaque processes. Improving transparency can lift not only accounting departments, but whole organizations.