AR Intelligence—Payment to Terms

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5-minute read

Welcome to this series of instructional articles on BlackLine’s AR Intelligence platform. In this installment, we’ll show you how to raise the bar and empower AR finance teams to unlock their own decision intelligence on a global scale by better understanding and tracking customer payment terms.

Purpose of the Payment to Terms Dashboards

This suite of dashboards tracks and measures customer payment terms, how customers pay to those terms, and the outstanding debt position by payment terms.

Why Is Payment Term Analysis Important?

For many businesses, the impact of granting extended payment terms and customers’ adherence to those terms are difficult to measure. While extending payment terms may be a commercial necessity, it is also a cost to the business that needs to be controlled. The business must understand if it is negatively impacting working capital.

When viewed on a case-by-case basis, the cost of extended terms and the impact on working capital can seem insignificant, causing the issue to be overlooked. However, when this is analyzed across a larger portfolio, the impact on working capital can be substantial.

With this suite of dashboards that provide an overview of the entire customer base and the debt outstanding, we can see the impact on collections, debt that is not being released into cash, and how customers are performing against their agreed to payment terms.

What Does the Suite of Payment Terms Dashboards Do?

Cash Collected to Terms—Payment Analysis

All the reports contribute towards the decision making and reporting for cash collections and cashflow reporting. Beyond giving AR leaders critical insight, we are providing decision intelligence on data that will used for commercial review and decisioning.

Furthermore, at a time when cash flow forecasting is so important, we can provide treasury and finance teams with analysis of the best possible collections based on payment terms and the debt position, and review how customers are paying to the terms granted.

For all stakeholders, they can see the impact of the payment terms being offered to the whole customer base and their payment performance against those terms.

Cash Collected to Terms—Payment Analysis

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These dashboards provide the following functionality:

  • Understand the number of customers on each payment term offered as part of their commercial arrangement and the performance against those terms split by days beyond terms

  • Review real time analytics displaying how the debt outstanding is split by customers’ payment terms

  • In some businesses, there may be different payment terms for the same customer depending on the goods or services being sold—the dashboards allow you to split by invoice

Note: clicking into a particular cell lets you drill into the customer detail that makes up those numbers

Payment Terms—Outstanding Debt

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  • This dashboard takes the analysis into debt position and measures the outstanding debt by payment terms

  • By drilling into the detail of the analysis, you have all the information at hand for a strategic review or to use operationally as a list for the collections team to target

Actions Drive Outcomes

The data in these dashboards can drive a review of many decisions and provides intelligence so you can take key actions that will impact the business, both commercial and finance.

For example, looking at the 30-day terms bucket, you can see the number of customers and the value owed by each customer based on the existing payment performance. Clicking into the bucket to find the details of the customers, you immediately have a full review, which could be used as a targeted action list of customers to prioritize for your credit controllers. You can easily see how this analysis drives and prioritizes actions that drive outcomes.

All this intelligence is at the fingertips of AR professionals who can make better data driven decisions.

Who Will Find the Payment Terms Dashboards Valuable?

These dashboards will be of obvious interest to the accounts receivable and credit management teams, but the analysis and intelligence they provide offer wider benefit:

  • Treasury teams will be interested because it provides the best possible collection based on payment terms and analysis of how the customer base is paying to those terms. When used with other dashboards, such as payment forecasting, we are providing treasury teams with an up to date and real time analysis of cash performance.

  • Sales and commercial teams will be interested to see the number of customers with extended payment terms, and if they are adhering to them, to determine if commercial agreements need review.

  • The Office of the Controller will now have access to dashboards that provide insight to how commercial agreements and debtor performance are performing and how cash flow and working capital availability are being impacted.

  • AR/credit management teams can provide an understanding of the different payment terms being used on sales invoices and customer accounts. This provides a volume metric based on the number of invoices and/or number of accounts—surfacing intelligence on the best possible cash collections so you can align DSO/Debtor Day targets accordingly.

This provides all stakeholders a real time view of customer payment performance based on payment terms and the impact it is having on the business.

Get your copy of the exclusive white paper New Questions to Gain New Intelligence in Accounts Receivable to discover the questions that can challenge your assumptions and help improve your outcomes, objectives, and critical results.