Assessing the Health of your Accounts Receivable with Sage Intacct

Nov 24, 2023 by Zazil Martinez

In uncertain times, securing your Accounts Receivable is vital. Paystand integration with Sage Intacct offers crucial insights and metrics for AR health that help reduce operational costs by 50%.

With the economy uncertain and layoffs increasing, it's crucial to assess the health of your AR. Business owners and financial professionals nationwide are unsurprised by the gloomy economic outlook. The COVID-19 pandemic continues to affect how companies plan and make provisions. Many haven't returned to normal or have lost hope of doing so.

With the constant menace of a recession, panic is understandable. However, knowing that external factors don't solely determine business success is essential. During recessions, some businesses struggle while others succeed and grow.

Paystand is here to help you succeed during tough economic times and protect your profits. During a recession, successful companies have cash reserves and access to capital. So, planning well in advance for the next downturn is very important. We will guide you on the best practices, tips, and key metrics to evaluate your AR's health. We'll also give you insights on how your business can thrive during this time.

 

Three Key Metrics to Assess Your Financial Health

 

1. Net days in AR

To assess your company's financial health, you must know the average days it takes to collect payments for services or goods. This metric is called net days in AR. It serves as a trending indicator of overall AR performance. To stay informed, you can check this measurement monthly to catch any issues.

To calculate days in AR:

  1. Total charges for the last six months/number of days in the previous six months = average daily charges
  2. Total AR / average daily charges = days in AR

 

2. DSO

Your days' sales outstanding (DSO) is a critical metric showing how long your company takes to collect its account receivables. It measures the average number of days credit sales are converted into cash. You should closely monitor this metric regarding your net days in AR.

To calculate DSO:

  1. Accounts Receivables / Net Credit Sales X Number of Days = DSO

 

3. Aging AR

The longer an invoice goes unpaid, the less likely it is to collect the total amount. The aged AR metric shows how easily we can collect money owed and measures how well we're getting paid.

Aged AR should be measured as a percentage in what is referred to as "buckets" relative to your total AR. Depending on your payer mix, the >90 days bucket should make up no more than 25% of your full AR.

Sage Intacct redefines what the reporting process looks like. Sage Intacct automates collecting data, running calculations, and building documents. It eliminates the need to spend hours on these tasks or seek help from IT. Users need no special skills or training to develop their reports. Identify what the report should include, and Sage Intacct does the rest.

During a recession, it's essential to monitor key metrics constantly. You can use dashboards that update in real time for this. Sage Intacct makes reporting more accessible and connects accountants, executives, and others to more data and insights. Uncertainty is both a cause and consequence of recessions. Reporting in Sage Intacct takes that uncertainty away.

 

Growing Amidst Economic Uncertainty


While evaluating the health of your AR is a crucial part of preparing for an economic downturn, it's not the only task you'll want on your to-do list to effectively recession-proof your bottom line. You'll plan with a comprehensive cash flow forecast and effectively collect receivables.

 

Plan Ahead

A cash flow forecast is crucial for any business because it tells you if you'll have the needed revenue to run or expand the business. It also allows you to see if more cash is going out of the company than in and identify the problem areas so you can reverse that cash drain. We've compiled a handy cash flow forecasting guide to simplify this process.

 

Effectively Collect Receivables

Paystand's Sage Intacct integration can help you collect any outstanding invoices, enabling you to quickly and easily generate and send invoices, define credit terms, manage collections, obtain the required liquidity to fund growth, shorten DSO, and seize new investments and opportunities as they arise. Offering real-time visibility throughout the AR process, finance teams can find the status of receivables anytime, from a wide-ranging scope of receivables down to each client and invoice.

 

Recession-proof Your Revenue With Integrated AR and Payment Automation


The right strategy for such stagflationary times is to recession-proof your business by realizing top-line revenue faster and reducing the costs of AR operations.

Finance teams running on Sage Intacct can realize top-line revenue faster by

  • Invoicing and collecting more quickly by up to 60%
  • Making it easier for customers to make payments

Finance teams running on Sage Intacct can reduce the cost of AR operations by up to 50% by

  • Consolidating credit card fees of 3-5%
  • Using a fee-less banking network
  • Fixing a monthly cost to process an unlimited number of payments

With Paystand and Sage Intacct on your side, you can stand firm in a turbulent economic environment and scale your business without your fees and manual tasks scaling too.

Get your free copy of our ebook, How to Leverage Sage Intacct to Thrive During a Recession, to discover more ways your business can thrive through the recession with style.