Inefficient processes and siloed systems make it hard for AR teams to stay on top of every invoice – and for you to gather accurate data with which to base decisions.
Wholesale distributors typically send 50K-1M+ invoices per month. Invoice management with automating AR processes will help streamline operations and improve cash flow as tracking, managing, and following up with all of these invoices is a massive job for distributors. In fact, AR teams for wholesale distributors can have hundreds of employees that are spread in locations across the country. Furthermore, your drivers and sales people also serve as an extension of your AR team if they collect payments when they drop off goods and sell new orders.
These teams often work in different software programs that don’t integrate with each other – making it difficult for you to gain visibility into every payment and your cash flow. Storing financial data in different silos makes it impossible to track the thousands of invoices that flow through your systems on any given day.
Disparate systems also prevent you from gaining on-demand access to crucial analytics. Because of this, you may have to base forecasts on historical data, as opposed to what’s happening right now. With a lack of insights into supply chain and customer relationships, you will miss opportunities to reduce costs and boost customer profitability – two tasks that are vital when you operate with low margins.
“51.7% of wholesale distributors want to improve cash flow, while 49.3% want to reduce their costs.”
Meanwhile, AR teams at wholesale distribution companies rely on inefficient, manual processes. Often times distributors use spreadsheets to store customer payment data, which can become unmanageable when you’re dealing with up to a million invoices each month. Spreadsheets are also notorious for errors, outdated data, and security issues. The unreliable data makes it impossible for you to trust your spreadsheets for accurate numbers.
Manual processes – whether paper-based or electronic – can lead to:
- Incoming cash being held up in AR
- High costs to manually match payments with their associated invoices
- The inability to accurately track the thousands of invoices that go out each month
- The need to re-issue invoices (sometimes multiple times)
- Inquiries from frustrated customers when their invoices are lost or contain errors
- Inconveniences for customers when they can’t pay with their preferred method of payment
- Spending valuable time and money on collections
- Higher day sales outstanding (DSO)
A single manual invoice can cost up to $11.50 to process. If you send out 100K monthly invoices per month, you can spend $1.15 million each month on this inefficient process.
Additionally, sending invoices via postal mail increases costs. Research shows that a single manual invoice can cost as much as $11.50 to process. Multiply this by the 100K invoices that a wholesale distributor could send each month, and you would spend $1.15 million per month on manual invoices. Automating AR processes would improve cash flow.
So, do your margins allow you to afford this much waste?
Interested in learning more? Download your copy of the Finance Leader’s Ultimate Guide to Digital Transformation in Wholesale Distribution now.