In high school personal finance, we learn that cash is king. In business, cash flow is king. Without proper cash flow, your business won’t be able to stay in operation to support the underlying mission of the business. One of the easiest ways to improve cash flow is to reduce your receivables by improving your collection process. There are several advantages in taking a look at your receivables first.

1. Instant Impact
   Collecting your receivables faster leads to instant cash in your hands. You can use the additional cash to pay off debt, hire additional staff, work on repairs or improvements around your facility, buy new equipment or even expand your operation. You’ll see the impact on cash flow right away with an improved collection process.
2. No Significant Operational Changes
   You can improve cash flow by cutting expenses, increasing sales volume, and streamlining business processes, but these methods will require operational changes that can take a long time to implement and even longer to see the impact. The process to improve your receivables will not require you to make major operational changes.
3. Minimize Unintended Consequences
   Managing a business is like playing chess, not checkers. Every business move can create a wave of unintended consequences, both internally and externally. These consequences can affect the business positively or negatively, but the more that you can control, the better. Changing the collection process will prompt far less consequences than changing the operations and changing the pricing/fee structure.

Because not all receivables are created equally, you need to monitor and capture the receivables that are the most important to collect. Depending on your industry and specific business situation, come up with a metric that allow you to prioritize your receivables. In healthcare, organize the receivables by timely filing deadlines on insurance claims. Once you miss the deadline, your receivable is no longer receivable. In manufacturing, organize your clients by volume and their average A/R Days. Collecting faster on your low-volume customers is not going to have as much impact as collecting faster on your high-volume customers, but you may find the low-hanging fruit in your low-volume customers. Monitoring A/R days by customer can give you a better insight into when each of your customers are likely to pay.

Using a visual analytics platform such as Tableau, you can transform your data into actionable insights that are intuitive and easy to use. Take a look at the accounts receivable dashboard below. The first thing you see is the vertical bar chart that shows the total A/R balance by the respective A/R days of the accounts. The visual makes it simple to understand the trend of your A/R and see any balance hikes that need to be addressed for collection. You can monitor the shape of the curve and work towards cleaning up the tail and flattening the curve overall.