## Innovations in Receivables Management
Over recent years, firms have invented many tools, techniques and practices to make accounts-receivable management more effective and process-efficient. The major themes are: re-engineering the process, offering alternative payment methods, orienting around the customer, evaluating risk, and deploying technology.
### 1. Re-engineering the Receivable Process
Re-engineering means a fundamental re-think and redesign of the accounts-receivable process using modern business strategies, to cut cost and improve efficiency. Because decisions made anywhere in the organisation affect how resources are allocated, receivables management has to be looked at organisation-wide.
Two key levers for improvement:
- Centralisation — route high-value receivable/payable transactions through a central point for better efficiency and faster recovery.
- Alternative payment strategies — offering multiple ways to pay speeds collections and acts as a marketing tool to attract and retain customers.
### 2. Alternative Payment Methods
| Method | How it works |
|---|---|
| Direct Debit | Automatic transfer from the buyer's bank account — reduces delay |
| Integrated Voice Response (IVR) | Customers pay via phone using a computer system + operators; ideal for bulk payments |
| Third-Party Collection | External agencies/banks collect via cash, cheque, card or e-transfer |
| Lock Box Processing | An outsourced partner collects cheques + invoice data and transmits them to the company for faster processing |
| Online Payments | RTGS, NEFT, UPI or apps (Paytm, PhonePe) for instant settlement |
### 3. Customer Orientation
For important customers, use a case-study approach — study each one's payment behaviour and design tailored strategies for quicker settlement (strategic customer relations).
### 4. Evaluation of Risk
Risk evaluation is central to building control mechanisms:
- Identify, assess and manage receivable risks.
- Once assessed, install controls to reduce risk to an acceptable level or eliminate it.
- Use the exercise to strip out inefficient practices (process improvement) and to re-think and optimise how tasks are performed.
### 5. Use of Latest Technology
Technology raises efficiency through automation and system integration:
- E-commerce uses computers/electronic communication to facilitate trade.
- Key enabling technologies:
- EDI (Electronic Data Interchange) — automates exchange of business documents
- Email — faster communication
- EFT (Electronic Funds Transfer) — quick, secure transactions
- Electronic catalogue systems — digital product listings (Amazon, Flipkart)
- Automated accounts-receivable systems replace manual work, cutting errors, cost and delay. They:
- automatically update customer balances, inventory and sales on each transaction,
- track receivables and collections for faster processing,
- store effectively unlimited customer data.