Automation has drastically changed the way companies do business. It provides the means for organizations to focus less on menial tasks and more on creativity and innovation. It also gives companies the ability to move away from manual tracking in spreadsheets, to a real-time dashboard, which saves time and gives a full and reliable visualization of the current state of collections.
Collections is one of the toughest and most critical elements of business operations, so it comes as no surprise that companies are investing heavily in automating this function. So, how can using a collection dashboard help, and why is it so indispensable as a growth tool?
What Is an Accounts Receivable Dashboard?
This digital display summarizes the current state of collections efforts. It uses accounting data to give owners and managers insight they can use to make strategic decisions. Managers can customize these dashboards to display the most important information to the AR team and the organization.
AI-driven dashboards allow managers to move away from manual processes of tracking crucial data. Too many organizations rely on error-filled spreadsheets and pay the price of inaccurate data that fuels poor decision-making and even worse results.
What Is the Importance of an Accounts Receivable KPI Dashboard?
There are several reasons companies should upgrade to an A/R metrics dashboard. The primary purpose is to see a company’s financial health at a glance. Financial data tells managers where the company stands and how well it performs. This information is essential for making sound strategic decisions that grow the business.
An A/R dashboard can also help managers identify problem areas to take corrective action. By spotting issues early, managers can avoid or minimize costly mistakes. The best dashboard also helps managers track progress and compare results over time. This information is invaluable for measuring the effectiveness of new policies and procedures and for making necessary adjustments.
Finally, managers can use A/R and cash flow KPIs to track the performance of the collections team. This data can help managers determine inefficiencies, seasonal differences, and staffing needs. They can also use the data to set realistic quotas, so A/R teams have precise goals they can aim to achieve.
Which A/R Metrics Should You Be Tracking?
The KPIs tracked by your A/R metrics dashboard determine its effectiveness. Your organization’s needs will determine the right KPI metrics for you. Even so, there are some accounts receivable KPI examples that most companies should review.
Days Sales Outstanding
This metric measures how long a company takes to collect on its invoices. A low DSO means customers are paying their invoices quickly, and a high DSO indicates that customers take a longer time to pay their invoices.
Collection Effectiveness Index
The CEI measures how well a company’s collection efforts are working. A high CEI means the company is collecting on its invoices quickly and efficiently while a low CEI shows room for improvement.
Accounts Receivable Turnover
Accounts receivable turnover measures how often a company collects its A/R balance. Companies should aim for a high turnover rate. High ratios suggest quick and efficient collections. A low turnover rate indicates that the company needs to improve its collections process.
First Pass Yield
This metric measures the percentage of invoices customers pay when the A/R team first attempts to collect payment. A low FPY indicates that the collections team is having difficulty collecting on invoices while a high FPY suggests efficiency.
Average Day Delinquent
The average day delinquent measures how long it takes customers to pay their invoices. A high number indicates that customers are taking longer to pay, and a low number means they are paying more quickly.
This metric measures the percentage of uncollectible invoices. A high charge-off rate indicates that the collections team has not effectively converted invoices into cash payments, which makes low charge-off rates ideal.
Cash Forecast Accuracy
Cash forecast accuracy measures how well a company estimates its future cash position. A high CFA indicates that the company has done an excellent job of predicting its cash flow. A low CFA suggests that the company needs to improve its forecasting process.
Revenue per FTE
Revenue per employee is a measure of productivity. It tells you how much revenue each employee generates. Managers can use this data to set quotas and compare the performance of different employees or departments.
Aging reports show how long receivables remain outstanding. This information can help managers identify which invoices are overdue and take action to convert them to cash before they become uncollectible.
What Does an Accounts Receivable Dashboard Track?
KPIs play a critical role in business management, but focusing too much on these metrics can cause the company to miss the bigger picture. The accounts receivable team has one primary focus: to boost cash flow. Consequently, management also needs to track the flow of money into and out of the business.
Tracking cash flow via the receivables collection dashboard gives management a complete picture of the company’s financial health. Solid analytics can help managers make informed decisions about where to allocate resources and how to improve collections. It can also help managers determine whether they have resources on hand to seize an opportunity or if they need to rely on credit.
Sometimes, managers must determine how much money they might have in the future. Cash flow forecasting is a challenging task requiring experience, skill, and complex calculations. Yet, your collection KPI dashboard can display this information with the click of a button and will continue to show real-time updates.
Who Uses an Accounts Receivable Dashboard?
All managers and financial professionals within an organization could benefit from using an A/R KPI dashboard. Each professional has his or her own needs, so it’s essential to choose a system that allows workers to select the accounts receivable dashboard examples that best meet those needs.
CEOs and CFOs
Both CEOs and CFOs need to be able to track the financial health of the company. An accounts receivable dashboard can help them see where money is coming in and going out. It also shows which invoices get paid and which ones remain delinquent. This information can help inform strategic decisions about where to allocate resources.
Controllers and Accounting Managers
Controllers and accounting managers take responsibility for the company’s day-to-day financial operations. They track cash flow to ensure the company has enough money to meet its obligations. This information can help them prioritize collections efforts and the bills they need to pay.
Collections managers are at the forefront of efforts to ensure on-time invoice payments. They need to be able to see which invoices are delinquent so they can take action to collect on them. An accounts receivable dashboard can help them see which invoices are overdue and which customers are not paying on time. This information can help them prioritize their collections efforts.
Sales managers need to be able to track the performance of their sales team. They need to see which employees generate the most revenue and which ones are falling behind. This information can help them identify the employees that need more training or assistance.
Accounts Receivable Analysts
Analysts track the performance of the accounts receivable department. Information on the dashboard can help them identify trends in specific areas. They can use this information to make recommendations about where the department can improve its collections efforts.
The credit manager determines who to extend credit to and under what conditions. Access to the A/R KPI dashboard can help them revise policies to reach more customers or reduce the risk of default. These require conflicting approaches, so the credit manager must work with the CFO to determine the best strategy.
How Does an Accounts Receivable KPI Dashboard Contribute To Business Growth?
A receivables collection dashboard is an essential growth tool because it gives managers the information they need to make decisions that feed cash flow and expansion goals. Let’s take a closer look at how it accomplishes this.
A/R Dashboards Reduce Data Fragmentation
When companies use spreadsheets and other manual processes, they pull data from multiple sources. There is no incentive to centralize this data, creating information silos. A/R dashboards consolidate that data without the risk of manual error or the cost of human labor.
Managers Can Leverage the Power of Real-Time Updates
Companies using manual processes must rely on reporting schedules to get data. For example, they might pull monthly, quarterly, and yearly reports. A/R dashboards provide real-time updates so managers know the current state of affairs at that specific moment. This, in turn, makes it possible for managers to quickly seize opportunities that arise.
A/R Dashboards Complement a Flexible Workforce
The past few years have taught companies the importance of agility, flexibility, and creativity. Successful organizations have used these three elements to respond to radical shifts in the economy and consumer habits. Workers can access A/R dashboards from anywhere with an internet connection, so there’s no longer a need to request files or go into the office to review physical ledgers.
A/R Dashboards Refocus Human Resources
Workers spend a lot of time on manual processes. Some managers would propose waste as a much better word. AI and dashboards eliminate these tasks so companies can unlock their workers’ creativity and strategic thinking. Automation also reduces staffing needs so companies can cut back on labor costs.
Better Cash Flow Reduces Credit Dependence
The goal of any business is to generate cash flow and make a profit. That’s the lifeblood of any organization. Companies that don’t have strong cash flows must rely on credit, which can be challenging and expensive to obtain. A/R dashboards give managers the information they need to improve collections and reduce outstanding receivables. This, in turn, boosts cash flow and reduces the dependence on credit.
Informed Decisions Lead to Improved Customer Relationships
The data A/R dashboards present can help managers make informed decisions about payment plans, late fees, and other aspects of the collections process. These decisions can improve customer relationships and reduce customer churn. They also reduce the tension created by aggressive collections efforts.
What Should You Look for in an Accounts Receivable Dashboard?
A/R dashboards bring many benefits to the table, but that depends on your software choice. Price and specs are important, but compatibility with business goals and existing software ranks above all else. Ensure you choose a company that supports your industry and its specific needs. Note that not all software has the capability to help you comply with the customer data and collection laws that may affect your business.
Next, consider the following features:
- Ease of Use: The system should be intuitive and user-friendly. Easy-to-use systems reduce disruptions and the need for lengthy training.
- Flexibility: Workers should find it easy to customize the system to meet their needs. For example, sales managers might need less detailed dashboards than the CFO.
- Integration: The system should work well with other software applications the company uses. These include enterprise management, accounting, and CRM systems.
- Reporting: The system should generate reports that are easy to understand and actionable. Workers should be able to customize the schedule for these.
- Support: The vendor should offer training material so employees can learn how to use the system. Follow-up support also ensures you get help when you need it.
At Gaviti, our A/R automation software provides these features and so much more. Long-term use by our clients has also provided tangible proof of what our software can accomplish and how. Clients have witnessed drastic reductions in their DSOs and time spent chasing invoices.
Are you ready to see how Gaviti can contribute to your business growth? Book your demo to get started.