Accounts Receivable (AR) teams are under constant pressure to send accurate bills, collect payments, forecast cash flow, and support the overall financial health of their organizations. At B2B companies, they often struggle with a fundamental challenge: effective task prioritization. In these organizations, lean AR teams spend their time completing the most urgent tasks rather than the most important ones, causing inefficiencies and delays in the collection process.
This misalignment arises because there is no clear prioritization. Should an AR representative focus on a $100 invoice that would be paid with a quick reminder or a $16,000 payment that might take more effort to recover? Without structured prioritization, many AR professionals spend their time on lower-value activities. This slows down cash flow and increases the likelihood of bad debt.
Real-time information and decision management tools, instead of outdated systems or manual processes, will help overworked and understaffed AR teams step back and assess whether they are focusing on the most impactful tasks. In fact, businesses that rely on manual AR processes spend 67% more time handling overdue payments than those that leverage automation.
Why This Challenge Persists
The problem of prioritization in AR persists because many organizations continue to operate under traditional, waterfall-like workflows. In this approach, tasks are broken down into sequential steps that are completed one after another, often without considering the overall financial impact. AR teams are tasked with completing the most immediate items, such as sending out invoices and following up on overdue payments, but they do not have a system in place to continuously reassess which tasks should take priority based on their potential impact on cash flow.
Much like the old waterfall model of software development, where each phase depends on the previous one, AR teams often follow a rigid process: send an invoice, wait for a payment, follow up if it’s overdue. While this works in theory, it ignores the reality that some payments are far more valuable than others, and that chasing after a small invoice may not be the best use of time when a much larger payment is hanging in the balance. Failing to dynamically adjust priorities in real-time means that AR teams miss opportunities to optimize cash flow.
Moreover, AR teams often lack access to comprehensive, up-to-date information. Many AR professionals rely on spreadsheets, emails, and basic ERP systems that don’t provide the data or analytics necessary to make informed decisions. Without the right data, AR teams are left to make decisions based on gut feelings or outdated practices rather than real-time insights. This lack of visibility into the full picture of accounts receivable makes it even harder to prioritize effectively.
There may also be a critical thinking gap in some AR departments. Some teams are highly capable and have robust AR processes, while others may outsource the function to lower-cost regions, where AR professionals simply follow a set of instructions without considering the larger financial context. In these cases, AR clerks may focus on sending out reminders or processing small payments without taking the time to evaluate which actions will bring in the most revenue. This “check-the-box” approach to AR is another reason why prioritization remains such a persistent challenge.
The Solution: Dynamic Prioritization
To solve this problem, AR teams need to adopt a more agile approach—what can be termed dynamic prioritization. Dynamic prioritization is the continuous reassessment of tasks based on their potential business impact, rather than their order in a linear workflow. It enables AR teams to shift their focus in real time, ensuring that the most important tasks always take precedence.
Dynamic prioritization involves two key components:
- Real-Time Data: AR teams need access to real-time data that shows them which customers are likely to pay, which payments are overdue, and which invoices are the most critical to the company’s cash flow. This requires integrating AR processes with more advanced analytics tools and systems that provide insights into customer behavior, payment history, and outstanding balances. With this information, AR teams can make informed decisions about where to focus their efforts.
- Automation of Decision-Making: By using software that can analyze real-time data and recommend the best course of action, AR teams can focus on high-value activities while letting the system handle routine tasks. For example, software could automatically prioritize a $1 million invoice over a $100 invoice, or flag high-risk customers that require immediate attention.
Dynamic prioritization mirrors the agile methodologies used in software development, where teams continuously reassess and adjust their priorities based on changing circumstances. Instead of following a rigid, step-by-step process, AR teams can be more flexible and responsive, adjusting their actions based on what will bring in the most revenue. This approach not only improves cash flow but also reduces the risk of bad debt by ensuring that large or critical payments are not overlooked.
A key benefit of dynamic prioritization is that it empowers AR teams to think strategically rather than just execute tasks. For example, if an AR professional knows that chasing a $16,000 invoice will have a greater impact on cash flow than processing a smaller payment, they can focus their efforts on recovering the larger sum. In some cases, it might even be worth spending extra time or resources—such as flying out to a customer’s headquarters—to ensure that a large payment is collected on time. This kind of strategic thinking is only possible when AR teams have the right tools and data to make informed decisions.
Furthermore, dynamic prioritization allows AR teams to avoid the trap of "busy work"—spending time on low-value tasks that don't move the needle for the business. Instead of spending hours following up on small invoices, AR professionals can focus their energy on high-priority payments that will make a real difference to the company’s bottom line.
Conclusion
The challenge of prioritization in Accounts Receivable is a persistent issue, driven by outdated workflows, lack of real-time information, and a failure to think strategically about which tasks will have the greatest impact on cash flow. However, by adopting a dynamic prioritization approach, AR teams can overcome these challenges and ensure that they are always working on the most important tasks.
Dynamic prioritization empowers AR professionals to focus on high-value activities, supported by real-time data and automated decision-making tools. This not only improves cash flow but also reduces the risk of bad debt, enabling organizations to operate more efficiently and effectively. As businesses continue to evolve, AR teams must embrace agile methodologies and shift away from rigid, waterfall-style processes. Only then can they truly optimize their efforts and drive better financial outcomes.
