Reduction in accounts receivables boosts cashflow, freeing up capital
Background
Our client's outstanding accounts receivables, including over dues, form a significant and increasing part of its Working Capital usage. R&G analysis showed the company needed to reduce its accounts receivable (AR) and that the lack of a credit limit setting process was causing unacceptable overexposures.
Approach
A client team measured current AR performance, analyzed the overdue part and payment terms. Two main reasons for overdues identified were a malfunctioning issue resolution process and unclear agreements with cash collectors. Efforts were made to shorten the issue resolution time from 21 days to 48 hrs. Service level agreements were established and incorporated in performance reviews.
Results
The new focus on reducing issue resolution time has resulted in the implementation of an AR process with a supporting system for measurement and analysis.
