7
WHITEPAPER Banking Results Managing Business Cash Flow with Dynamics 365 for Finance and Operations

WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

  • Upload
    others

  • View
    1

  • Download
    0

Embed Size (px)

Citation preview

Page 1: WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

W H I T E P A P E R

Banking Results

Managing Business Cash Flow with Dynamics 365 for Finance and Operations

Page 2: WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

Banking Results:Managing Business Cash Flow with

Dynamics 365 for Finance and Operations

Overview

A huge amount of business to business commerce is done on account. In other words, businesses are offering credit to their customers. Extending credit to customers is a practice which started a long time ago, and it’s employed today by companies of all sizes in various industries. It’s a common business practice, and in a world that seems to run on credit, it’s almost impossible to avoid.

While extending credit to customers has helped companies increase sales revenues, this practice has also contributed to large accounts receivable balances. Furthermore, in many cases, this has created a new problem: cash flow.

The Problem of Cash Flow

Many companies report huge sales figures but still lack cash to fund operations or meet current financial obligations. This is because a large majority of sales are on account, resulting in huge receivables rather than cash. Many companies are forced to turn to banks for short term financing at prohibitive costs. Some resort to third party factoring houses or sell off receivables at deep discounts which erodes the profits that would have been made from the sales.

The importance of cash to a business entity cannot be emphasized enough. 82% of small businesses fail due to inability to control this critical business necessity. While this finding is specifically analyzing small business, the same principle applies across business of all sizes. Companies need to be solvent to fund business operations. They also must properly manage operating costs to be profitable. Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term borrowings. Receivables collection therefore helps to improve both a company’s liquidity and profitability by increasing cash flows as well as potentially reducing borrowing expense.

With cash flow being so vital to a company’s survival, it’s safe to say a company’s success rests in its ability to effectively manage accounts receivable and collections. Unfortunately, receivables collection and management remain a challenge to many businesses.

Many companies still rely on accounts receivable collection operations which are neither efficient nor effective. They depend on poorly organized receivables and collections information, bad data, and out of date billing and invoicing systems.

The success of a company’s receivable collection operations depends heavily on the choice of software used to facilitate these tasks which are so critical to a healthy cash flow . Choosing a software that meets all the business requirements is important, but it also must be able to adapt, change, and grow as the company does in order to ensure the system responsible for keeping a healthy cash flow continues to deliver – even as the business progresses. To the many companies facing accounts receivable collection and management challenges, Dynamics 365 for Finance and Operations is a dream come true.

Software as a Solution

Dynamics 365 for Finance and Operations, presents a streamlined, organized, and user-friendly solution to accounts receivable management and collections which can be configured and customized to meet the needs of a vast variety of business entities ranging from mid-sized to large companies with multiple credit and payment arrangements.

The Finance and Operations workload within Microsoft Dynamics 365 has evolved from what was formerly known as Dynamics AX. The evolution brings the ability to streamline more business processes through connected data, but it can also be utilized as a standalone workload.

“The number one cause of failure for small businesses is their inability to properly manage their cash flow.” 2

Business Insider

Page 3: WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

In Dynamics 365 for Finance and Operations, all information related to accounts receivable collections and management is organized in one central view – the Credit and Collections page. This allows credit and collection managers to oversee all applicable activities from a single place. This solution’s friendly interface improves organization, data updates, decision making, and reporting by simplifying processes and making data more accessible to those who need it.

Some of the more notable and distinguished features within Finance and Operations include:

Credit and Collections Workspace

The Credit and Collections workspace is a one-stop shop, providing a 360° view for all collection-related activities.1 It brings together data from multiple sources, giving managers the ability to make quick, data-driven decisions.

Enhanced Reporting

SSRS based reporting improves both report content and visual presentation.1 It goes without saying that accurate, up to date reports, which are easily understood, improves decision making ability.

Power BI Integration

Integration with Power BI allows for the presentation of aggregate information in graphical views.1 The ability to visually represent data within a dashboard allows a team to make smarter decisions based upon data.

Accounts Receivable / Credit and Collections Integration

The integration of Accounts Receivable and Credit and Collections ensures real time data updates.1 Collection agents and managers do not have to deal with outdated or irrelevant data which can hamper their ability to perform.

Aging Snapshot

The Aging Snapshot feature provides a customer’s calculated aged balances at any given point in time.1 With one click, collection agents can access accounts due for collection, making prioritization a breeze.

Collection Letters

Predefined, system generated, collection letters provide timely notification to customers with past due balances.1 This feature assists in closing the gap between issuing an invoice and collecting on payment.

Interest Codes

Interest Codes allow the system to automatically apply late payment charges to past due balances thus reducing the amount of manual activities performed by collection agents, and again making for a more efficient process.1

Customer Pools

Collection agents can now be assigned Customer Pools.1 These help improve the organization of collection activities and contribute to effective management by allotting certain customers to each agent.

List Page Accessibility

All customers for collections, collections activities, and cases are accessible from the list page allowing for a more intuitive and accessible platform.1

One Step Fee Changes

Interest and fee charges can be waived, reinstated, or reversed in one step.1 It also makes write off transactions and not sufficient fund (NSF) payment processing more simplified.

To fully reap the benefits of all these new features in Dynamics 365 for Finance and Operations, there are some required setups that must be made. Almost all the forms required for setup are accessible from the Credit and Collections page.

Account Statements

The Credit and Collections Page provides an organized, central view for all collections related information and activities. It also provides direct access to the Credit and Collections Workspace. Setup usually begins in the Customer form where the frequency of the Customer Accounts Statement is defined. Many companies define the frequency of Customer Account Statements based on the working relationship and history with each customer.

Figure 2 – Credit and Collections page

Figure 1 - Credit and Collections Workspace with Power BI charts

For example, a company may make it a policy to send out Account Statements once every quarter to old and established customers, but then they may send them every month to new customers or customers with below average credit history.

Page 4: WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

It is common for a company to use a different collection letter for each stage of the collection process. The system allows for multiple collection letters, but a Collection Letter Sequence would also have to be defined.

A Collection Letter Sequence controls the order in which the collections letters are sent to a customer (Figure 5). For example, the 1, 2, 3 sequence ensures collection letter 1 must be sent before collection letter 2, and letter 2 must be sent before letter 3. Letter 1 could be a notifying letter, letter 2 might be a warning letter including late charges, and finally, letter 3 might be calling for legal action.

The frequency of a Customer Account Statement is defined on the Customer form under miscellaneous details (Figure 3). The Customer form is accessible from both the Accounts Receivable page and the Credit and Collections page.

Collection Letters

Most companies send out collection letters to customers with past due balances on their accounts. Dynamics 365 for Finance and Operations allows users to predefine collection letters and generate those letters whenever needed. Collection letters are defined in the Forms Note form which is accessible from the Credit and Collection page.

A Collections Letter Sequence is assigned to a customer through the customer’s posting profile (Figure 6). This is done in the Customer Posting Profile form accessible from the Credit and Collections page.

Figure 3 –Customer account statement frequency set to always

Credit and Collections > All Customers > Select Customer > Edit > Miscellaneous Details > Account Statement

Figure 4 - Forms Note

Credit and Collection > Setup > Forms > Form Note

Figure 5 – Collections Letter Sequence

Credit and Collections > Setup > Collection Letter Sequence

Figure 6 – Customer Posting Profiles form

Credit and Collections > Setup > Customer Posting Profile

Page 5: WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

Figure 8 – Aged Balance report

Credit and Collection > Collections > Aged Balance

Aging Snapshot provides records for all customers or for customers in a specific Customer Pool if a Customer Pool has been configured (Figure 8). The information is presented on the aged balances list page as well as on the collections page. This enables collection agents to know what is past due from various customers. They are then enabled to initiate the collection process against those customers.

Customer Pools

Customer Pools allow companies to group customers based on predefined criteria for collection purposes (Figure 9). Individual collection agents are assigned to specific Customer Pools. This agent assignment is an optional setup, but it could be very helpful for companies with varying customer types. It allows companies to better organize the collection management process.

For example, a company that caters to both retail and wholesale customers may group retail customers in one pool and wholesale customers in another pool. The use of Customer Pools enables company design strategies that target specific customer groups with collection methods more appropriate for their customer type. This feature provides more flexibility to companies regarding credit management and collections.

Aging

The Aging Period Definition enables companies to analyze the maturity of customer account balances based on a specific date. Each aging period corresponds to a column on the list page or to an aging report when an analysis of a customer balance is performed.

A company with many customer groupings may define multiple Aging Periods for various Customer Groups. Dynamics 365 for Finance and Operations is flexible enough to accommodate multiple Customer Groups based on user defined criteria. Aging Period is defined in the Aging Period Definition form accessible from the Credit and Collections page (Figure 7).

Collection Agents

A Customer Pool is assigned to one or more Collection Agents (Figure 10). A Collection Agent in Dynamics 365 for Finance and Operations is an employee responsible for customer collections – they are responsible for collecting payment on invoices and accounts receivable. Agents handle all collection activities involving customers within assigned pools.

A large company with multiple Collection Agents may improve organization of the collection process by grouping agents into Collection Teams. This is an optional setup, but it may be very useful as it allows for better management of employee teams – not to mention, more clarity around processes for specific Customer Pool collection policies and procedures.

Figure 7 – Aging Period Definitions form

Credit and Collection > Setup > Collections > Aging Period Definition

Figure 9 – Customer Pools form

Credit and Collection > Setup > Customer Pools

Page 6: WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

Figure 10 – Collection Agents form

Credit and Collection > Setup > Collection Agents

Many businesses opt to apply late charges to past due balances in the form of an interest assessed on the balance due. In Dynamics 365 for Finance and Operations, users may set up late charges which could be a single or recurring rate. This is done in the Interest Codes form accessible from the Credit and Collections page (Figure 11).

Interest

“The fact is, managing the various policies and processes that contribute to a healthy cash flow involves diligence, attention to detail, and performing numerous tasks which consume swaths of employee time each day.”

Figure 11 – Interest form

Credit and Collection > Setup > Interest Codes

Page 7: WHITEPAPER - PowerObjects · Timely collections on accounts receivable provides not only the cash flow needed to stay solvent, but it also reduces the need for expensive, short-term

Fig 12 – Customer Write-Off Reason Codes form

Credit and Collection > Setup > Customer Write-Off Reason Codes

Write-Offs

In certain circumstances, collection managers or agents with appropriate authority may have to write-off all or part of the interest or charges applied to past due balances. In Dynamics 365 for Finance and Operations, users are able to setup Reason Codes which are used to justify such write-offs.

Write-Off Accounts are used for general ledger write-off entries when a collection activity results in a write-off transaction. These accounts are assigned in the Customer Write-Off Reason Codes form (Figure 12).

Utilizing this Microsoft platform for the basis of a business’s core cash flow management processes, companies large and small can benefit from both monetary gains and decreased employee utilization for mundane tasks which can now be automated.

By posting an invoice, Dynamics 365 for Finance and Operations updates a customer’s accounts receivable balance. The system calculates the payment due date based on the terms of payment configured. Payment not received after the due date is reflected on the customer’s account statement and the aged balance report. Collection agents send out system generated collection letters to customers. Agents may use interest codes to apply late charges to unpaid balances, when applicable. Payments received are then processed and posted through a payment journal. Finally, accounts receivable and customer account balances are updated in real time following the posting of a payment journal.

Just from reading the above processes, it’s clear there are many more processes taking place than are typically considered when thinking about what goes into accounts receivable and collection management. After all, cash flow likely wouldn’t be the biggest cause of business failure if it were better understood, but to many, it looks as simplistic as what goes out must come in.

Dynamics 365 for Finance and Operations is changing the game. It doesn’t remove the tedious tasks, but rather, it automates them with the robust ability to customize the environment to meet your needs. This frees human resources of the mundane activities, and instead, they can undertake more complex activities which do more than simply keep the doors open.

One Efficient Process

PowerObjects, an HCL Technologies Company, is a leader in delivering Microsoft Dynamics 365 solutions through unparalleled offerings of service, support, education and add-ons. Winner of the 2017 Microsoft Worldwide Partner of the Year Award for Dynamics 365 Consulting and Systems Integration, PowerObjects has built an unmatched team of Dynamics 365 experts that help organizations increase productivity, streamline business processes, and build better relationships.

About PowerObjects

References

1. Credit and Collections in Accounts Receivable - Finance & Operations | Dynamics 365 | #MSDyn365FO.” Finance & Operations | Dynamics 365 | #MSDyn365FO | Microsoft Docs, https://docs.microsoft.com/en-us/dynamics365/unified-operations/financials/accounts-receivable/collections-credit-accounts-receivable

2. Desjardins, J. (2017, August 02). Here’s why small businesses fail. Retrieved March 23, 2018, from http://www.businessinsider.com/why-small-businesses-fail-infographic-2017-8

3. Persoone, Sven. “Accounts Receivable Management.” Graydon NL, Graydon NL, 8 Aug. 2017, www.graydon.nl/en/wiki/accounts-receivable-management

When a business’s accounts receivable and collection management team has more time, they are able to focus on the future. That time might be spent finding new ways to facilitate growth, identifying shortcoming in processes which might otherwise go unnoticed (until it’s too late), or even more time forecasting and measuring company performance against the economic climate. Being able to spend more time forecasting when to keep extra cash on hand can save a company from pitfalls, but it can also be part of setting a business up for exponential growth. The Accounts Receivable and Collection Management functionality within Dynamics 365 for Finance and Operations is changing the game for businesses. Furthermore, the workload can be utilized in numerous other ways to aid in the overall financial and operational activities of a business. All that’s before mentioning the other workloads also housed under the Dynamics 365 umbrella.

In a world that is increasingly relying on bigger data and faster insights, it makes sense to place trust in a platform built for exactly that. Dynamics 365 for Finance and Operations is enabling companies to outpace the competition by automating mundane tasks and allowing stronger insights into the inner workings of a business. The data is not only bigger – it’s better. The insights are not just fast – they’re instantaneous. And the platform is not just for the big companies with money and resources – it’s scalable for all.

Click here to learn more on how to harness the power of Dynamics 365 for Finance and Operations.