What is the AR Process Workflow?

At OAR, we understand that each company has unique needs and challenges, so we create customised AR processes for every client after thoroughly analysing their operations.

Read the article with our experts' recommended AR process workflow, which encompasses several key stages. We will highlight how each step is designed to enhance the overall financial health of our clients.

How Does the Customised AR Process Work at OAR?

We start the process by thoroughly analysing the client's business operations, financial structure, and AR history. This detailed assessment allows us to identify key areas that need attention and improvement.

Once we have identified the weak points of an existing AR process and deeply understand the client’s business, we design a customised AR strategy that aligns with their operational goals and financial objectives. This strategy addresses the already existing issues and includes tailored invoicing schedules, personalised communication plans for payment reminders, and specific procedures for handling overdue accounts. Our customised approach ensures that the AR process is not only efficient, but also effective in maintaining healthy cash flow and minimising late payments.

We offer multilingual support and adapt to different regulatory environments, catering to the diverse needs of our global clients. Our AR process is flexible and scalable, evolving with the client's business growth and changing requirements.

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First Point of Contact

We begin by evaluating new clients to assess their creditworthiness and payment history. This initial evaluation helps us understand the client's financial stability and reliability, ensuring that we can tailor our accounts receivable process to meet their specific needs and confirm the client's company is solvent. Our standard investigation process includes:

1. Verifying the legal name of the company.
2. Consulting Companies House (if this information is publicly available in the respective country).
3. Reviewing the debtor's website and social media profiles.
4. Examining open sources (such as OpenCorporates, ZoomInfo, etc.) to determine the company structure, key decision-makers, and financial information.
5. Investigating any investments received by the company.

Once the evaluation is complete, we onboard the new client with a welcome email. This email is a formal introduction and sets clear expectations regarding payment terms and processes. It typically includes essential information such as invoice submission procedures, payment deadlines, and contact details for any AR-related queries. The welcome email also establishes a positive and professional tone, reinforcing the importance of timely payments and open communication.

The welcome email provides detailed instructions and a point of contact to ensure clients are well-informed about their obligations and the AR process. This proactive approach helps prevent misunderstandings and payment delays, fostering a smoother transaction flow. It also demonstrates our commitment to transparency and customer service, which can enhance client trust and satisfaction.

Invoice Management

This step involves generating accurate and detailed invoices that reflect the goods or services provided, the agreed payment terms, and the due dates. We ensure that invoices are consistent, professional, and compliant with relevant regulations.

Once invoices are issued, the next step is sending them to clients. Timely delivery of invoices is crucial for prompt payment. OAR employs multiple delivery methods, including email, postal mail, and online client portals, to ensure that clients receive their invoices in the manner that suits them best. This flexibility helps accommodate various client preferences and enhance their overall experience. Tracking the dispatch and receipt of invoices is also an integral part of this stage, ensuring that any delivery delays are promptly identified and addressed.

We keep detailed records of issued and sent invoices, which provide valuable data for future financial planning and auditing purposes. Regular follow-ups ensure clients know impending due dates, further encouraging timely payments. This systematic approach to invoice management is fundamental to effective AR processes, ultimately contributing to the financial health and sustainability of the business.

Chasing Campaigns

Chasing an invoice is a crucial part of the AR process, designed to ensure timely payments and maintain a healthy cash flow. These campaigns are typically segmented into three stages: before due, early overdue, and late overdue.

Before Due: In this initial stage, pre-emptive reminders are sent to clients a few days before the invoice due date. The purpose of these reminders is to encourage timely payments by gently prompting clients that their payment is approaching. This can be done through polite emails or phone calls, emphasising the due date and providing any necessary payment details.

Early Overdue: If a payment has not been received by the due date, the invoice moves into the early overdue stage. At this point, follow-up communication is initiated immediately, usually within a week of the missed payment. The tone remains courteous but firm, reiterating the overdue status and requesting prompt payment.

Late Overdue: We move to the late overdue stage for invoices that remain unpaid beyond the early overdue period. This stage involves more assertive follow-up actions, as the likelihood of payment decreases the longer an invoice remains outstanding. Communication may include stronger language and a clear outline of potential consequences for continued non-payment, such as late fees or legal action. It could also involve engaging commercial debt collection agencies.

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Reports & Evaluation

The final stage includes thorough reporting and evaluation to ensure effective cash flow management and to highlight areas for improvement. 

Reconciling payments is a critical task that involves matching incoming payments with the corresponding issued invoices. This process ensures that all transactions are accurately recorded, discrepancies are identified, and financial records are kept up to date.

Flagging defaulted accounts for debt collection is another essential component of this stage. Accounts that consistently fail to meet payment deadlines are marked for further action. This involves carefully assessing which debts require escalation to debt collection agencies.

Regular plans and reports on collections provide valuable insights into the effectiveness of the AR process. These reports typically include key AR metrics such as days sales outstanding (DSO), collection rates, and the age of receivables. Analysing these metrics helps businesses understand their cash flow trends, identify problematic areas, and make informed decisions to enhance their AR strategies.

Detailed reporting also enables continuous improvement by pinpointing specific issues and tracking the success of implemented changes. For instance, if the reports indicate a high number of late payments from a particular client, businesses can adjust their credit policies or follow-up procedures for that client. Additionally, regular evaluation ensures compliance with financial regulations and internal policies, reducing the risk of legal issues.

Author: Giles Goodman, Commercial Intervention Officer OAR
Giles Goodman is the definitive expert in cross-border commercial debt collection, mediation, legal recovery, and accounts receivable. Based in London, his 25 years of experience provide a global perspective on preventing defaults and efficiently managing overdue accounts. Giles’s insights and analyses empower business owners worldwide with strategic approaches to financial management and recovery.

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