Frost & Sullivan: How the B2B Businesses of the Future Will Manage Receivables

NEW YORK, Sept. 10, 2019 /PRNewswire/ -- Businesses fight for every advantage they can get. Their lifeblood is the stream of capital they must ensure. An advantage in securing this stream of capital is the difference between nurturing a business to success and having it wilt. Consequently, those businesses that gain a significant advantage in securing their receivables and ensuring constant cash flow will replace those that do not. 

To achieve this advantage hurdles need to be overcome:

1. When asking for payment from customers, a business needs to do so in a way that will allow the relationship with the customer to continue to grow stronger over time.
2. A business needs to understand the payment behavior of its individual customers no matter where they are in the world and no matter what type of customer they are.
3. A business needs to find a good way to stay on top of its receivables that easily integrates with its current systems so that internally the process of securing receivables is easy.
4. And a business needs to achieve all of these with minimal effort and resources so that it can concentrate on its core value proposition.

Today B2B businesses are using Smart Receivables Collection Solutions to gain this advantage and they are consequently outpacing their competition. This solution is critical because of the natural trends of the market. Atradius, a leading credit insurance company, reports that according to companies it surveyed in the US ecosystem, 55.2% of B2B sales were reported to be made on credit. One can only understand how much of a shift this is when looking at the same figure one year ago which stood at 44.6%. The company further reports that the average DSO (days sales outstanding or the number of days to collect cash once an invoice has been made) is a staggering 51 days for SMEs and 69 days for large enterprises.

Using Smart Receivables Collection Solutions not only protects businesses from risk and ensures financial viability but it also allows for compounding competitive advantage because freed cash flow can be further leveraged for investment. Financial analysis of today's business ecosystem shows clearly that companies are sacrificing investment in themselves year after year in order to maintain cash flows.

Taking this into consideration along with today's 1) significant number of businesses requiring additional financing to compensate for a lack of cash flow 2) an expected increase in long overdue invoices negatively affecting DSO 3) trade policy risks 4) U.S. GDP growth forecast to slow to 2.6% this year and further to 1.7% in 2020 leads Frost & Sullivan to believe that the adoption of Smart Receivables Collection Solutions is becoming an important component in managing working capital and receivables.

We are witnessing businesses stopping to utilize countless employee hours, resources, and excel sheets to manage receivables. We are witnessing businesses stopping to sacrifice investment opportunities in order to try and maintain cash flows. But what is this solution that provides stability, longevity, and competitive advantage? 

Smart Receivables Collection Solutions are a tool that optimizes receivables management in an intelligent and automatic way. This solution does not work like a collections agency. It does not take a percentage of the money that it enables customers to pay your business. It is a piece of software that requests receivables in an effective way and for the leading players in the market such as Gaviti and Yaypay it is a sophisticated piece of software that learns your customers using AI. When leveraging Gaviti's software for example, not only do you take advantage of software that learns the most effective way to request payments from your own customers but you leverage the knowledge of Gaviti's growing database of customer behavior patterns that constantly adapts itself to different types of businesses and to different regions of the world. This additionally allows for real time and accurate risk assessment of your customer's payments. Imagine having a fully customizable and intelligent tool that reminds your customers to pay in an automatic but effective way and that makes it a priority to strengthen your relationship with those customers.

The leading Smart Receivables Collection Solutions integrate with almost any available ERPs such as SAP, NetSuite, Sage, Oracle, and Priority and can even integrate with custom ERPs. Testimony to the increasing adoption of this solution is the integration of Gaviti's solution with the Priority ERP system. We learn from Gaviti's CEO that their solution not only heavily reduces delinquent clients and receivables risks but that it on average "leads to a 30% improvement in DSO". That means that receivables for SMEs and large enterprise are payed on average more than 2 weeks earlier and 3 weeks earlier respectively for companies using their solution. This all translates into serious cash flows time and time again, which create a stronger more stable business that can invest in itself and that will be able to withstand the challenges and risks of tomorrow. This is why B2B businesses will use Smart Receivables Collection Solutions and this is why they will outpace those that choose not to. 

Frost & Sullivan is a global strategic and financial consulting firm. Over the past six decades, Frost & Sullivan has become world-renowned for its role in helping corporate leaders, investors, and governments navigate economic changes and identify disruptive technologies and new business models resulting in a continuous flow of growth opportunities to drive future success. Today, more than ever before, companies must innovate, not only to survive, but thrive in the future. We provide service to 10,000+ clients worldwide, including emerging companies, SME, the Global 1000 and the investment community.

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Tiran Rothman
Head of Frost Israel
Frost & Sullivan
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