A 15-point checklist for collection efficiency in the food and beverage industry.

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In the lead up to Christmas 2019, Australian food and beverage manufacturers are steadily preparing for peak trade season. It’s a tough environment for the food and beverage industry right now—drought, rising costs from labour to energy, and pressure on retail prices are straining profit margins.

Ambitious companies are routinely making efficiency improvements to stay competitive. Inventory control and logistics are obvious starting points for an efficiency overhaul if you’re a food and beverage manufacturer or distributor. Less apparent are the straightforward efficiency wins waiting in the accounts department.

Yet the pay-offs are potentially huge: reduced workload, increased workflow, and more working capital returning to the business.

Like any workflow, your accounts receivable process can be optimised for efficiency. A good place to start is your collection efficiency.

What is collection efficiency?

Collection efficiency is a measure of a business’ ability to turn its unpaid invoices into cash. In an ideal world, your business would be collecting 100 percent of accounts receivable available for collection each month. That means your customers pay on time and sales revenue reliably flows back into the business.

Because your collection efficiency ratio is influenced by a number of processes, it’s a good barometer of the overall effectiveness of your accounts receivable function.

What is collection efficiency?

Collection efficiency is a key indicator of the performance of your accounts receivable function. Efficiency is achieved by optimising:

  • Staff productivity
  • Credit terms
  • Payment policies
  • Customer service and communications
  • Payment methods

If you sell on credit, 100 percent collection efficiency is almost impossible—late payments are a persistent problem for many small to medium businesses. But wide-ranging improvements are absolutely do-able. For a midsized company, even a 10 percent improvement in collection efficiency could equal tens of thousands of extra dollars in the bank account each month —in recovered debt, and money saved on labour, legal services and bank loan fees.

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After working with a variety of food and beverage companies (from health food manufacturers, to beer and wine suppliers, to coffee roasters) we’ve developed this simple checklist you can use to assess your collection efficiency.

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