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Stop shrinking Profits! 3 Strategies to Optimize Payment Processing and Close Books Faster

Discover three effective strategies to streamline payment processing and expedite book closing, enhancing your business's financial health and profitability.

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Amrit Mohanty

Jun 28, 2024

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Running a successful business involves more than just providing excellent products or services; it also requires efficient financial management. One area where many businesses struggle is optimizing payment processing and closing books quickly. Of the 2,300 organizations in APQC’s General Accounting Open Standards Benchmarking survey, the slowest 25% require over 10 days for monthly closings, while the top 25% finish in 4.8 days or less—roughly half the time. The median group completes the monthly close in 6.4 days.


Slow, inefficient processes can decrease profits and waste valuable resources. By streamlining these processes, businesses can significantly improve their operational efficiency and financial health. Optimized payment processing ensures timely transactions, reduces errors, and enhances cash flow management, enabling businesses to allocate resources more effectively. Rapidly closing books, on the other hand, provides accurate and timely financial insights, facilitating better decision-making and strategic planning.


These improvements not only save time and money but also build a stronger financial foundation, ultimately contributing to the long-term success and competitiveness of the business. Here are three strategies to help you streamline these processes, saving time and money while enhancing your overall financial health.


Leverage Automation in Payment Processing


According to a report by Deloitte, businesses that leverage automation in their financial processes can reduce operational costs by up to 32% and increase transaction speed by more than half. Automation in payment processing revolutionizes the way businesses handle transactions, reducing manual errors, speeding up workflows, and enhancing overall efficiency. By integrating advanced automated systems, organizations can streamline their payment processes, ensuring accuracy, security, and seamless operations. Embrace automation to transform your payment handling, reduce costs, and focus more on strategic growth.


How to Implement:


Automated Invoicing and Payments

  • Implement software that automatically generates and sends invoices based on predefined schedules. This reduces the likelihood of human error and ensures timely billing.
  • Set up automated payment reminders for clients to reduce late payments.
  • Use systems that support automatic payment reconciliation, matching payments received with outstanding invoices.

Integrated Payment Solutions

  • Invest in integrated payment solutions that can handle various payment methods, from credit cards to digital wallets.
  • Ensure these systems are integrated with your accounting software to enable real-time updates and reduce manual data entry.

Fraud Detection Tools

  • Use AI-powered tools to detect and prevent fraudulent transactions. This protects your revenue and reduces the time spent handling chargebacks and disputes.


Benefits:

  • Faster, more accurate processing of payments.
  • Reduced manual workload for your finance team.
  • Enhanced cash flow management.


Optimize Your Accounts Receivable (AR) Process


According to Dun & Bradstreet's Q3 2022 industry report, 21 out of 211 industry segments reported more than 10% of their aging dollars were 90+ days past due, indicating a worsening trend compared to Q2 2022, where 16 segments faced similar challenges. This increase underscores the growing strain on AR management across industries amid economic stress from rising interest rates and recessionary pressures. To reduce these risks and increase the stability of cash flow, effective AR processes and proactive collection strategies are required, such as:


How to implement:


Clear Credit Policies

  • Establish clear credit policies and ensure they are communicated effectively to your clients. This includes setting credit limits and terms of payment.

Regular AR Monitoring

  • Regularly review your AR aging reports to identify overdue accounts and take proactive steps to collect outstanding payments.
  • Implement a tiered collection strategy, starting with gentle reminders and escalating to more assertive actions as needed.

Early Payment Incentives

  • Offer discounts for early payments. This can encourage clients to pay ahead of the due date, improving your cash flow.


Benefits:

  • Reduced DSO, leading to better liquidity.
  • Lower the risk of bad debts.
  • Improved client relationships through clear communication and incentives.


Implement Real-Time Financial reporting


Real-time financial reporting enables businesses to close books faster and gain timely insights into financial performance. According to a study by Deloitte, organizations with real-time reporting capabilities close their books 33% faster on average compared to those relying on traditional reporting methods. This agility is crucial for adapting to market changes and making informed business decisions promptly. Real-time financial reporting revolutionizes the way organizations handle their financial data, offering up-to-the-minute insights and greater transparency. By integrating real-time reporting solutions, businesses can make faster, more informed decisions, enhance accuracy, and improve overall financial management.


Implementation Tips:

  • Invest in robust financial reporting software that supports real-time data integration.
  • Train finance teams on leveraging real-time reporting tools effectively.
  • Implement regular reviews of reporting processes to continuously optimize efficiency.


Benefits:

  • Faster Decision-Making: Real-time data empowers management to respond quickly to financial trends and opportunities.
  • Compliance and Accuracy: Timely reporting reduces the risk of compliance issues and improves the accuracy of financial statements.


Conclusion

Optimizing payment processing and accelerating the closing of books are crucial steps in enhancing your business's financial health. By leveraging automation, optimizing your accounts receivable process, and streamlining your financial close, you can save time, reduce costs, and improve accuracy. These strategies not only prevent shrinking profits but also position your business for sustainable growth and success.

Implementing these strategies requires an investment of time and resources, but the long-term benefits far outweigh the initial efforts. Start today and watch your financial processes transform, freeing up your team to focus on what they do best—driving your business forward.


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