Credit Risk Management

California Software Company Uses AI to Improve Cash Flow

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Tesorio has developed an AR platform that uses artificial intelligence to maximize cash flow. Above, the Tesorio team in Burlingame, CA.

A California software company has developed a state-of-the-art accounts receivables platform uniquely designed to minimize DSO and maximize cash flow. 

In today's collections environment, understanding your customer data is one of the most critical elements in the collections process.  If you can't identify customer payment trends or tendencies it becomes nearly impossible to reasonably forecast company cash flow.  Indeed, CFOs and controllers have long maintained that a company cannot grow without sufficient operating cash flow.

The importance of cash flow was re-emphasized just last November when Dean Foods Company, one of the nation's largest dairy producers and distributors, filed chapter 11 bankruptcy in part because of inadequate cash flow as the company's net operating cash was an anemic 2% of annual revenue in 2018. 

Conversely, a sudden increase in operating cash flow of $164 million was instrumental in helping to keep YRC Worldwide, one of the nation's largest trucking companies, out of bankruptcy court in 2018 as a simple 2.73 day reduction in days sales outstanding (DSO) increased cash flow by $55.2 million, according to the company's SEC filings.

Many companies hestitate to upgrade or change their accounts receivable system simply because they feel they can continue to achieve the same results using the same age-old systems and processes as in the past.  Smaller companies can sometimes get by without automated systems and their built-in efficiencies, but larger companies that want to maximize free cash flow and reduce cash conversion cycles must have an efficient AR system.

Tesorio, a company founded by Carlos Vega in 2015, has developed an innovative cash flow performance platform that applies machine learning, or artificial intelligence (AI), to process key financial data to help customers with accounts receivable automation including smart workflow tools, predicted pay dates and automated collections forecasting.  Companies like Veeva Systems, Box and WP Engine have already benefited from the Tesorio AR System.

"Access to capital and strong free cash flow generation are among the biggest determinants of a company's ability to grow," said Mr. Vega, Tesorio co-founder and CEO.  "It also affords management the freedom to optimize for long-term growth and innovation."

If your current AR system does not have cash-related DATA readily available at the click of a button, you are behind the times and potentially driving critical inefficiencies.  The following are classic examples of AR system inefficiences:

More than one hour required to generate reports: Today's premier AR systems have the ability to sort existing customer data and provide essential reporting in a matter of seconds.  Often, managers spend multiple days to prepare an important report for upper management that could easily be prepared quickly and accurately with a better AR tool.

AR system can't identify non-paying customers: If your AR system cannot easily identify why your customers are not paying you, it's time to re-evaluate the value of your current system.  Knowing the sources of costly payment delays is critical for any business to improve internal processes, reduce long-term delays and get customers to pay sooner thereby reducing DSO.

AR system cannot provide estimated payment times: If your system is not updated, it may not be able to provide accurate periodic financial reporting information to predict cash flow and progress made towards cash flow targets. This necessitates the need for managers to reachout individually to each collector to get updates on promises to pay and reasons for payment delays.  It could take days to get this information when it could be provided in a matter of seconds with the right system.

Cannot provide strategic and one-time dunning campaigns: Automated dunning campaigns targeting specific customer types are critical to allow the collections team to focus on more complicated and time consuming customer issues, while still increasing your cash flow.  If your company only has the ability to run a dunning campaign based on the number of days past due and does not allow for targeting specific customer types then it may be time to look for a new AR system.

Cannot identify high risk past due accounts quickly: Some collectors have a hard time identifying what they should focus on daily, weekly or even a monthly basis. If your current AR tool does not allow your collections team to identify certain high risk past due accounts quickly, it may be time for a new AR tool. Most premier AR tools allow management to help prioritize collection accounts for their collectors and assign specific tasks and work-lists. 

Conclusion: Spend less time reporting, more time generating cash.

If your collections department is spending endless hours preparing manual reports, you are only hurting your company cash flow.  Most managers would agree that a collectors time is better spent on collections rather than endless manual reporting.  By upgrading your AR systems, your cash flow improvement will be significant to allow you to plan for growth and save significant dollars on headcount.

Written by Glen Olson, President and founder of Olson Cash Flow Consulting Services.  The original article can be found at
John Bassford, CreditPulse, contributed to this article.