Businesses that extend credit to their customers incur operating costs as a result. This includes billing and collection expenses as well as the cost of the working capital needed to finance the receivables while they sit on your books and not in your bank account. According to industry analysts PayStream Advisors, companies that deploy A/R Automation software like Anytime Collect (anytimecollect.com) often realize the following:
- 10 to 20 percent reduction in Days Sales Outstanding (DSO)
- 25 percent reduction in past due receivables
- 15 to 25 percent reduction in bad debt reserves
- Increased cash availability
- Increased productivity and ability to hold down staffing costs
Average Days Sales Outstanding (DSO) is estimated at 61 days according to a recent study conducted by Atradius, a leading trade credit insurance provider. For a $10 million company, that means they’re carrying $1,694,500 on their receivables balance sheet. Assuming that Paystream’s estimated savings are correct, a $10 million company would save about $50,170 annually with a payback in about 2 months and a return on investment (ROI) of nearly 500%. And that’s with a low estimate of 10% improvement in DSO and bad debt write-offs. There are very few investments that generate this level of return in such a short period of time
Here is an example of the cost savings and return on investment calculation for an average-sized business who implemented A/R automation software
You can calculate your potential savings and return on investment of A/R Automation software based on your actual financial data using a free calculator at www.anytimecollect.com. This calculator makes some assumptions about the cost of acquiring and implementing collection automation software to estimate a Return on Investment and Payback Period.
The cost estimate is based on a typical configuration of the collections software which will vary significantly depending on the complexity of the system you choose. A/R Automation products like Anytime Collect are designed to scale from small companies to much larger enterprises and it can be setup in less than a day compared to larger systems that could take 4-6 months to install and configure. Costs will also depend on the number of users in a credit or finance organization.
Your actual performance improvement may vary and are somewhat dependent on how effective you are currently. Assuming you offer 30 day credit terms then you won’t see much of an improvement if your DSO is already at 32 days but if it’s 61 days like most companies then there’s a lot of room for improvement.
One final thought – in collections if you don’t ask for the money you don’t get the money. Doing it efficiently and effectively with tools like A/R Automation software, contributes directly to the bottom line in more ways than one.
Anytime Collect, Because credit collections shouldn’t be a challenge.