The Rise of the AR Revenue Cycle Manager

The role of credit managers is changing… dramatically. As organizations more aggressively seek to improve operational efficiencies, lower costs, and maintain growth, credit managers are being called upon to view their roles in a whole new way.

To be clear, this shift won’t only impact AR processes. The financial operations of the entire business enterprise depend on it.

Historically, it has been common for credit managers to be focused solely on isolated issues, such as late payments and non-payments, DSO, and lagging indicators. But what if they instead adopted a holistic view and examined how AR fits into the business enterprise? What if they were to embrace the idea that AR can actually play an instrumental role in impacting other outcomes—even enterprise profitability?

With this enlightened, expansive view comes a new title for credit managers: Revenue Cycle Manager (RCM). RCMs are responsible for overseeing billing accounts and helping departments resolve their revenue cycle problems, so the role goes beyond simply being a process watchdog. Instead, the RCM is a strategic partner to leadership and various corporate functions.

At the heart of this transformation is credit managers’ untapped superpower, one they’ve actually possessed for a very long time: visibility into customer behaviors and the insights they leverage to manage debt and risk appetite, as well as collections and cash flow.

AR teams typically have extensive access to customer data that can paint a stunningly accurate picture of customers’ credit patterns and behaviors, including sales. This offers them the ability to share insights and showcase the essential, multifaceted nature of AR with other functions.

This visibility has remarkable value, because such insights can benefit the enterprise in big, strategic ways, enabling functions to get away from operating in siloed fashion and instead work together to make better decisions that improve processes and the enterprise’s ability to grow.

There are three important steps toward expanding the perspective of an AR manager to that of an RCM.

The RCM must be able to identify operational breakdowns and disconnects between functions. For instance, where are finance teams not working together and sharing information that could make both more successful? If one team is managing risk but not impacting collections, and vice versa, that’s a disconnect.

These disconnects can also creep into leadership circles where conflicting KPIs and targets can be a challenge. For example, perhaps the CFO is pushing to collect more cash and reduce bad debt at all costs, but the CEO is looking to grow the business. They’re unlikely to achieve growth without adding an element of risk that newer customers may not be strong payers, and so both targets require an element of give and take if they are to be successful.

That’s one challenge. But, if both of those KPIs are being set by individuals who are also working with inaccurate, or limited, data relating to customer behaviors, risk appetite and collections processes within the business, then those leaders, too, are working in silos which will serve only to exacerbate contradictory or competing KPIs.

While the wider organization doesn’t always perceive AR teams as customer-facing, interacting with customers and tracking customer behaviors is actually a big part of what they do. As such, their insights can positively impact customer-facing functions, such as sales and marketing. To be successful and operate efficiently, sales and marketing need to target customers that are most likely to convert. That could take the form of purchasing a product, increasing recurring purchases, or buying additional product lines. It’s a waste of time for them to be fostering customers who aren’t “keepers” or, worse, indicate they will be risky payers.

Making savvy decisions about building the desired customer base is dependent on how aligned a credit and finance approach is with an organization’s sales strategy and revenue targets. AR intelligence can help sales verify good customer profiles. Knowing that risk is lessened, those teams can focus on doing business with those customers and extend to them bigger lines of credit.

RCMs can’t do their jobs and achieve operational excellence if teams are relying on manual processes. This results in delayed, poor-quality data and performance. 

The most accurate way of determining risk is by analyzing which customers are paying on time, and this can only be learned through analytics and intelligence. That’s why it’s essential for businesses to adopt solutions that automate processes, streamline and unify data, and give teams access to real-time intelligence so they can make quick, informed decisions — all of which drives improved performance, not only for AR and finance, but across the business.

Once an automated solution is in place, the RCM can quickly assess customer behaviors, identify payment patterns, direct business strategy, and help company functions utilize data, talk intelligently with each other, and improve processes.

Many people don’t like change, especially if it means adjusting the way they’ve been operating for a long time. So, while this evolution might require some feather smoothing, it can be done.

High-level stakeholders and customers aren’t impressed by nips and tucks to processes. What they care about is compelling results. To get started on this journey, RCMs need to communicate to those inside and outside AR the importance of being able to access customer data quickly and leverage automation solutions that ensure that all data that enters the system is both timely and accurate.

Making the case for these sorts of holistic changes has the best chance of improving the health and viability of the enterprise and bringing about positive business outcomes. 

As enterprises realize the gains of improving AR processes, they’ll be in a stronger place to manage the many challenges that impact profitability. But this evolution can only begin when finance leaders embrace the emergence of the role of the Revenue Cycle Manager and the impact that AR decision-making has on key functions across the enterprise, including sales and strategies to improve customer relationships and expand the customer base.

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