Credit Matters Blog

Data Mining Your Accounts Recievable - A Great Cashflow and Profit Enhancement Strategy

Kim Radok 05 November 2012


Data mining the accounts receivable operations can result in finding a number of fascinating facts about your business, irrespective of the size of your business. There is a great deal of literature about those business organisations which have benefited from using these methodologies.

In the past I have asked business people what they see in their accounts receivable ledger. Most answers have been a jumble of thoughts and observations; not all which have been thought though and articulated clearly.

My usual answer to this question is normally; I see your cash in your customers' bank accounts. I know management and salespeople take a different view; they only see sales made and invoiced. What we might actually find by using data mining methodologies may very well be different.

Many other operational factors become visible through data mining your accounts payable, other than purely noting your cash which is somewhere else. However whether you  know what to look for, and actually want to know and act on what you find, is another matter.

A business organisation is more than a sum of the financial statements produced for taxation and accounting purposes. Your business is also about people, efficiency of operational processes, customer behaviour and commercial image. By data mining your accounts receivable operations you can find out many interesting insights about these business factors.

When I review the accounts receivable operations by using the appropriate tools, I can also see the following factors such as:

1  issues affecting cashflow;

2  the factors which affect the accuracy of expected cashflow budgets;

3  results which indicate the efficiency of your business operations;

4  strategies, good and bad, used by your sales department to "make a sale";

5  employee attitudes and their performance;

6  the customer service ethos of your business;

7  customer behaviour;

8  the difference between the stated image of your "brand" and the reality seen by your customers and suppliers.

I believe data mining your accounts receivable operations and studying the results with an open mind will provide opportunities to validate the factors shown above.

Once you see and understand the results of your data mining exercise, you can work on improvements to improve your business's cashflow and profit results.

May you be paid today rather than tomorrow 

 Kim Radok