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Improving Cash Flow with Electronic Payment Strategies

In today's slow-growth economy, many business leaders and municipal officials are dealing with aging receivables, which can limit cash flows and operating capital. Despite the breadth of technology designed to improve funds availability and cut processing costs, many organizations still have not taken advantage of it. Instead, they rely on manual payment processing models that often exacerbate delays in collecting receivables and converting them to working capital.

Companies and municipalities that have moved to automated receivables processing are able to expedite receivables collection in order to:

  • Improve days sales outstanding (DSO)
  • Minimize financial risk
  • Create processing efficiencies
  • Gain a competitive edge

Know your DSO

Many economists, ratings agencies, investment firms and others who track our nation's health rely on certain key performance metrics to measure the health of the U.S. economy. One such metric is DSO, which represents the average number of days it takes an organization to collect revenue and turn it into cash after making a sale. The lower the DSO, the less time it takes to collect and put your receivables to work. But, in a sluggish economy, DSO tends to increase.

The benefits of going electronic

Today's robust electronic receivables systems offer attractive cost and efficiency incentives to upgrade your acceptance of electronic payments and remittance processing operations and potentially lower your DSO. With these systems, you can manage, monitor and control your accounts receivable, payment processing, collections and reporting functions from a single, secure platform.

Furthermore, migrating to an automated technology platform enables you to integrate e-Commerce transaction capabilities and use this expansion of payment acceptance methods as a strategy to attract and retain customers.

Centralizing all remittance data and images in a single repository hub gives your organization a head start on forecasting cash flow, cash allocation and exception management and resolution. The features of a customized electronic payment solution will allow you to:

  • Accelerate collections and lower DSO
  • Receive electronic alerts about important payments or returned checks and ACH items
  • Archive and retrieve images and indexed data online
  • Capture and upload data throughout the day, including check payments sent to a lockbox, ACH payments and wire transfers
  • Fully integrate with increasingly popular bill pay services to accept electronic payments from consumers and small business owners
  • Ensure data security and disaster recovery
  • Obtain full integration of paper and electronic payments received through a consolidated data file containing all receipts
  • Customize data files to feed directly into accounts receivable systems and apply receipts directly to outstanding account balances freeing A/R personnel to focus only on exception items

Getting started

There are several "best practices" you can implement to close the invoice-to-collection gap and lower your DSO. For example:

  • Choose a depository services provider familiar with the changing landscape of electronic payment alternatives and able to implement scalable solutions to allow your receivables management capabilities to grow in sync with your business.
  • Market the benefits of electronic payments to your customers to ensure all involved in the A/P and A/R functions view the shift as simple and seamless.
  • Consider offering financial incentives, such as one-time rebates or ongoing discounts, so customers are highly motivated to comply. You may be surprised at how many of your customers are eager for an electronic alternative to paper–based payments.
  • Analyze the costs and benefits of remote deposit capture for your receivables management strategy. This web-based solution makes it possible to capture and scan checks sent from multiple locations and process payments the same day.
  • Establish a continuum of treasury services by consolidating those services at one institution offering perspective and professional guidance to help your business stay profitable and competitive.
  • Integrate receivables collection information into back office A/R systems, allowing automated cash application and reduced manual effort.
Improving cash Flow Chart

How Chase can help

Recognized as a technology innovator in the receivables processing field, Chase offers a full suite of depository solutions. Our solutions can consolidate all accounts receivable transaction data and images into a single, secure repository accessible 24/7 via the Internet, enabling you to expedite exception resolution, improve workflow processes and apply insightful analytics.

Our leadership in remote deposit capture technology means you can process payments the same day, giving you faster access to working capital while reducing DSO.

Chase also delivers a wide range of virtual payment solutions to maximize your e–commerce opportunities. We serve the needs of all industries and can expand your payment acceptance methods and provide secure transaction processing in a one-stop–shop environment.

No matter what the economic climate, Chase understands the working capital needs of business and public sectors. We'll leverage our resources to help you accelerate funds availability, reduce risk exposure, increase bottom-line performance and achieve your goals.

To learn more about the services available for accelerating your receivables collections contact your Chase Commercial Banker.

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