With increasing demands and rising costs, facilities management firms are facing unprecedented cash flow pressures. Could changing mindset and implementing technology be the secret for FM businesses to succeed in the current economic climate?
According to Dimitri Raziev’s recent article on Forbes, the answer is yes. The CEO of Kolleno, a global collections and cash management platform, believes that by leveraging smarter, more personalized and more flexible technology, facilities management providers can save time, improve their cash flow and better position their businesses to flourish.
Breaking with (certain) traditions
The “old-school challenge” – as Raziev puts it – is what happens when firms resist disruption and think that sticking to traditional methods will save time and energy. Methods like complex compliance operations that require manual reporting, paper-based processes or manual A/R and collections management are all not only full of risks of errors but also often the source of revenue loss for companies, as time spent on these no-added-value tasks means less time spent on revenue-driving initiatives.
In the context of the current economic climate, protecting cash flow is crucial, and there are many steps organizations should take internally to start pivoting their strategy. „Through my work with companies in the sector, I’ve found that the most common problem is that the payment of invoices usually takes longer than expected. For many firms, invoices are past due by more than a couple of months. However, each company can improve its own receivables management when approaching it strategically” – Raziev points out and lists fundamental approaches.
- Having a credit control policy with a specific timeline and collection steps can be a great way to have a course of action available in the event of a debt.
- Being clear about collection procedures and encouraging good behaviours through positive reinforcement. Incentives such as markdowns, complimentary maintenance or future credits for prompt payments could help decrease your accounts receivable.
- Contacting customers to confirm the reception of the invoice can be an incentive for them to pay you ASAP. Sending a reminder email a few days before the due date to ensure the customer hasn’t forgotten about your fees is also helpful.
- As sending invoices and reporting are prone to human mistakes and delays on the part of your financial and accounting teams, pay extra attention to the billing process.
Data is at the heart of it all
Based on Raziev’s experiences, access to relevant information must also be seamless and originate from a single source. If employees in charge of the collection have to chase co-workers or other departments to gather and unify data, it will hinder their work and impact its accuracy. More importantly, the data needs to be checked regularly, as the CEO points out.
The subtle art of communicating
Communicating efficiently with clients is an art that companies must master. There is a fine line between too much correspondence and too little, between being too gentle and being too complacent. The key to a tailored strategy is to find out what works best for the given customer.
Work smarter, not harder – implement technology
Many companies struggle to decrease days sales outstanding (DSO) to improve internal liquidity and be able to rely on steady and predictable cash flow. Besides maintaining good customer relationships while collecting invoices, reducing staff’s working hours spent monitoring invoice payments dynamics, contacting clients and following up, can also become a major pain point.
Still, most facilities management companies don’t want to externalize their collection for fear of tainting their customer relationships. But they don’t want to overload their hard-working staff either. Such organizations can consider looking for technologies such as AI and machine learning that can soothe these pain points and manage cash flows more effectively, Raziev advises, adding: Forward-looking facilities managers should look to research potential smart technology to facilitate their day-to-day operations as they implement these internal practices to work smarter, not harder.