Southeast Asia's receivable conundrum

As the economy in Southeast Asia continues to grow and evolve, so too do the challenges faced by businesses operating in the region. One area that has become increasingly problematic in recent years is accounts receivable (AR). Our research shows that 35-70% of invoices are paid late, depending on the industry.

Credit information of customers

There are a number of factors that have contributed to the rise of AR issues in Southeast Asia. One major issue is the lack of reliable credit information for businesses and individuals. In many countries in the region, credit reporting is still in its infancy, making it difficult for businesses to assess the creditworthiness of their customers. This has led to a high number of bad debt and defaults, putting a strain on the finances of many companies.

Limited legal protections

Another issue is the lack of strong legal protections for creditors in many Southeast Asian countries. In some cases, it can be difficult or even impossible for businesses to collect on overdue accounts, as the legal system is either not well-equipped to handle such cases or is heavily biased in favor of debtors. This can make it difficult for businesses to maintain a healthy cash flow and can even put them at risk of going bankrupt.

Facing AR issues

Perhaps the biggest challenge facing businesses in Southeast Asia when it comes to AR is cultural. In many countries in the region, there is a strong sense of "face" and saving face is considered very important. This can make it difficult for businesses to confront customers about overdue payments, as it may be seen as impolite or even rude. The question on every business owners mind is simple, is $X amount of money worth hurting the relationship with Y company and damaging my brand.

The challenges of hiring and retaining staff

Hiring in Southeast Asia can be challenging due to a lack of qualified candidates, cultural differences, and language barriers. In Malaysia, the annual price tag of hiring and retaining a single AR executive ranges from USD 9,000 to USD 12,000. This excludes the investment required in training and development employees once they join a company.

Mitigating AR issues

Despite these challenges, there are steps that businesses operating in Southeast Asia can take to mitigate the risks associated with AR. One key strategy is to develop strong relationships with customers and suppliers, as this can help to build trust and understanding. Another important step is to invest in AR management systems and processes that can help to identify, mitigate, and manage risks.

Ara is a software solution that does exactly that. It reduces AR related tasks by 90% and accelerates the order to cash process by 34%. All this without any setup fees, no cure means no pay. It benefits both vendors and buyers through timely reminders, automated cashback opportunities and easy payment.

Ultimately, the key to overcoming the challenges of accounts receivable in Southeast Asia is to stay informed, be proactive, and be willing to adapt to the unique cultural and legal landscape of the region. With the right approach, businesses can successfully navigate the complex world of accounts receivable in Southeast Asia and emerge stronger and more resilient.

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