How digitalisation can improve cash collection and credit management strategies

With SMEs dealing with so many urgent tasks and deadlines, following up on late invoice payments (and paying debts to lenders) can easily get pushed aside. It isn’t until cash reserves are in crisis that you take time to sit down and look at cash flow.

There’s a pretty straightforward answer to these concerns: digitalising your SME’s finances. When everything is online and displayed on an accessible dashboard, you’re privy to early alerts and patterns that can deploy long-term cash management strategies.

Digitalisation makes sense in a world where users can choose from a growing list of business online tools. There’s no reason to put up with manual or offline processes anymore—digital platforms are smoother and faster to use, and help companies maintain resilience during turbulent times.

Common cash problems that plague SMEs

• Delayed cash collection
  Most SMEs run out of cash because they fail to manage their cash flow well. Though they may be signing MOUs and contracts, these don’t translate into real-life revenue when cash payment collection delays aren’t supervised. If this problem balloons, the bottlenecks could force you to turn down new projects or stop operations altogether.
• Poor credit management
  With businesses taking out loans to survive the pandemic and
  support operations as the economy improves, you may be faced with significant inefficiencies that bog down processes and platforms used for credit management. You need to develop clear
  plans and schedules for repayment to avoid suffering from potentially harmful ramifications later on. In addition, manual
  processes are bulky and wasteful, complicating reconciling information in real-time. Payments can get bogged down when people are caught up with other priorities, leaving you on the receiving end of preventable late fees.
• Unclear internal costs
  Poor communication between departments and the paper nature of many invoices can make it difficult to grasp how you actually spends per month, making it even harder to maintain healthy cash flow.

Here are some examples of the most common costs that you may not be tracking effectively:

How can digitalisation help?

• Better cash collection
  When you digitalise your invoices, it’s much easier to know who hasn’t paid up, who and when to follow up, and when to add penalties for unpaid invoices. A digital platform provides a clear and immutable source of truth for both you and your customers, helping reduce the friction and delays traditionally associated with cash collection.
• Credit management
  Digitalising credit payments will help you keep track of debt information and avoid double payments. For example: A debt to a supplier may have already been repaid by Employee X, but because those at other branches had no idea, Employee Y makes the exact same payment.
• Internal costs
  Once you’ve begun to digitalise your accounts payable and accounts receivable, why stop there? You can also digitalise other processes, many of which impact the bottom line. Suitable departments and processes for digitalisation include Human
  Resources, Customer Services, Sales, and Accounting. Business digitalisation offers a bird’s eye view of your spending and helps you seize future opportunities.

How to get started with digitalisation

The ways in which digitalisation tools help SMEs increases every day, whether it’s through understanding the value of your employee wellness programmes or assessing the marketing campaigns you run for your products and services.

The “digital future” we’ve all heard about has already arrived, and SMEs should act now to leverage the digital revolution and transform their business for the better.

If your business is in Singapore, you can take advantage of grants and programmes to help you begin your digitalisation journey, like the
Government Assistance Scheme and the Start Digital Pack. You can also get in touch with UOB, the preferred business bank for SMEs.