With the distribution world still facing a lot of uncertainty, many leaders are looking to go back to basics. Understandably, there are many areas for improvement, but it appears that fixing one specific area of your process could cause a chain reaction that sets you up for long-term success.
2020: Turmoil Turns into Unpredictability
Distribution continues to face challenges, but 2021 presents opportunity. Last month, we discussed the wide range of scenarios that distributors may want to plan for in the coming year, noting that after 11 consecutive years of growth, 2020 put some… unexpected pressure on distribution firms.
“After a record economic expansion summing 10 years and 8 months, the United States officially entered recession in February 2020 due to the COVID-19 pandemic. At the onset of the pandemic, in March and April, wholesale trade sales decreased by 21.4%, though it increased by 5.4% in May.
Wholesale distribution is projected to decline by 11.1% in 2020 compared to 2019. Distribution should return to modest growth in 2021 (2.6%) and strong growth in 2022 (9.5%), but the recovery will be a slow climb and industrywide sales growth won’t return until the second quarter of 2021.”
Not out of the Woods
Well, things change. Less than a month later, lockdowns may be back and that prediction may be outdated. Something we also discussed in last month’s blog, it pays to have a flexible forecast and contingency plans if there happens to be less than stellar growth.
Dialing it Back and Rebuilding Stronger
But no matter how you look at it, no matter how tepid or robust the growth in 2021, this year steered many firms toward process and technology changes focused on driving resilience.
In turn, leaders needed to build a framework for their business, often going back to the basics. Many, especially those whose infrastructure was unprepared for remote work, began to realize just how flawed processes really were. One of these areas? Accounts receivable.
A Timeless Challenge: Did the Pandemic Expose Cracks in the Accounts Receivable Department?
Considered one of the least automated processes in any business, companies have long struggled with accounts receivable. In fact, according to a recent study by the Association for Information and Image Management (AIIM), 50% of all businesses still use manual processes to manage their receivables.
Worse than that, however, is the fact that the system in place to handle the preceding step is one of the most automated and technologically-enabled areas of the business—CRM. For distributors , whose money is made on outside sales, it begs the question—what are the dangers and why has this gone ignored?
The Dangers of Disconnection in the AR Department
According to the Controllers Council, more than half of respondents to a recent Auditoria.AI study felt that manual AR processes were holding them back. 52% felt that lack of automation caused a lack of responsiveness in their business, along with 73% who were sick of repetitive follow ups and 12% who felt that they never had the right information.
Why AR Automation Seems to Get Ignored
As discussed in a recent MDM webcast, lockdowns and revenue challenges might have been the wake up call leaders needed. Distributors needed to get paid faster. They also needed to cut costs—and probably needed to be nearly as productive with fewer workers.
As leaders looked at the way their businesses work, they realized the holes in the process. Many ignored a true AR automation approach, assuming that their ERP implementation was enough to do the job for them. It wasn’t. ERP can connect basic workflows, but without the right configuration, data doesn’t flow the way it needs to.
The Automation Opportunity in AR: Approaches to Improve
As discussed in this MDM webcast titled Create a Predictable Balance Sheet in Unpredictable Times, Jon Seaman of Esker looked at a variety of ways to tackle the AR problem. From technology to accountability to analytics, Seaman discussed the following tips for improving AR:
- Stop treating automation and technology as a threat—it’s going to augment your work and reduce pressure, not kill your job.
- Demand accountability from staff. Ask for the right information and understand whose customers are paying late.
- Facilitate your customer’s payments with e-invoicing and self-service. Customers plan to pay you. Make it easy for them. Studies have shown that e-invoicing can result in cost savings of anywhere from 60% to 80% compared to traditional paper-based processes. Pair this with the increasing demand for customer portals and you can spend less time AND deliver a better experience.
- Connect systems across a variety of processes. Your ability to automate credit applications requires you to connect CRM with ERP to pass the right data between solutions. Take this further by facilitating the cash application process. This has been the promise of ERP integration, but only when well connected.
- Gain a better understanding of collections. Knowing who to call and when to call them is an important approach to ensuring things get collected efficiently. Ask how much time you spend prioritizing collections calls. Then look at how much time it takes to find the information. Having your information and workflows aligned across your business can facilitate this.
- Turn to intelligence. Being able to see the underlying cause behind a late payment, delay or inaccuracy is invaluable. Understanding how to drill down can help you adjust your own practices to make life easier for everyone.
A Connected and Automated Business Starts with the Right Help
With many in the distribution space still working to figure out what the workplace will look like in December, it’s safe to say that 2021 is incredibly unpredictable. However, by connecting business processes and employing well-built business management solutions, you can ensure data flows and people are always pushing your business forward.
As a leading provider of ERP, CRM, and BI tools for distribution companies, MIBAR provides a variety of solutions that can help you realize the promises of automation and facilitate processes. Get to know more about your path to a smarter solution in our free whitepaper titled Why Replacing Legacy Systems with a Cloud Solution is Now Mission Critical and 6 Critical Business Processes to Build Customer Loyalty.
Learn more about the solutions we offer and contact us for a free consultation.
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