EY identified and effectively implemented key opportunity levers in the pursuit of organizational growth and financial optimization. With our assistance, the company adopted an advanced AR tracking system to monitor and manage their focus customers efficiently, ensuring prompt and targeted actions to collect outstanding payments, reducing the overall AR aging and improving cash flow. To manage severely aged AR (over 365 days), the company embraced the First-In, First-Out (FIFO) accounting method, which prioritized the oldest invoices for collection, minimizing the risk of further bad debts and maximizing cash recovery.
Next, we conducted a detailed review of aged AR and segmented customers based on specific criteria, such as historical payment behavior, credit rating, geopolitical triggers etc. to tailor the credit and collections strategies, leading to enhanced collections while maintaining customer satisfaction and sales performance. EY rationalized customer payment terms across the product portfolio to help the business achieve a balanced and sustainable approach to invoicing and collections.
We also assisted the company to set cash collection targets for Key Account Managers (KAMs) and aligned individual performance with the overall financial objectives. To support the KAMs in their AR monitoring and collections efforts, we developed specialized tools that provided valuable insights and automation, empowering KAMs to efficiently manage their accounts. We set up a monthly cadence of finance leadership and commercial leadership to review the current month collections status and collections forecast.
Lastly, EY developed and deployed a comprehensive leadership dashboard with real-time visibility into revenue projections and collections forecasts. We also established a Project Management Office (PMO) to oversee the implementation of AR improvement initiatives and supported the company in addressing quality-related disputes, which helped in building positive customer relationships and reduced the instances of bad debts.