Accounts Receivables

Improve Your Accounts Receivable (AR) Automation Efficiency:

Accounts receivable is a time-consuming procedure when done manually, but with AR automation, you can gather the relevant financial health measures at any given time. So, to boost your bottom line or customer relations, manage your accounts receivable with the proper fit solution.

Your firm sold items or services to clients on credit, and it is now time to collect the money owed. Selling goods and services and collecting money are perhaps the most important aspects of running a successful business. If the company does not collect these payments, it may go out of business.

Accounts receivable (AR) is in charge of sending invoices, processing payments, and reconciling the books. When done manually, it is a time-consuming operation, especially if you have to call clients many times to hunt down payments. Accounts receivable automation software can handle that for you, freeing up your AR staff to focus on the wider picture, perhaps increasing profitability.

In this blog, discover and learn:

• What is AR automation?
• Why Is It Important to Have an Efficient AR Process?
• How Does AR Automation Work?
• Why is automating accounts receivable becoming standard practice in business?
• How to Put AR Automation in Place?
• What are the advantages of Accounts Receivable Automation?
• What to do Next?

What Is Accounts Receivable (AR) Automation?

• AR automation is the use of technology to simplify and automate accounts receivable (AR) procedures. The use of software or digital technologies to remove human chores involved with managing client invoices and payments is referred to as AR automation.
• AR automation’s primary purpose is to save time, cut expenses, and decrease mistakes that might arise in manual AR procedures. It includes everything from issuing invoices to tracking payments and assuring the recovery of monies owed to the company.
• AR automation not only improves productivity but also delivers real-time visibility into a company’s financial status. It helps finance teams to swiftly gather critical financial indicators, making informed choices simpler.

Why Is It Important to Have an Efficient AR Process?

A well-designed and properly performed AR process may assist organizations in maintaining a healthy cash flow, reducing the risk of financial losses due to fraud or mistakes, reducing the time and resources needed to collect payments, and ultimately improving their overall financial performance.

To achieve these objectives, businesses must develop stringent processes and controls throughout the AR process. This includes having accurate and timely information systems in place to record all sales transactions, using standardized invoice formats and payment terms to simplify and streamline the payment process, and establishing clear and consistent communication channels with customers to allow for the quick and effective resolution of any issues.

Furthermore, any firm that relies on its AR process to manage its finances must be willing to engage in employee training and provide the required resources to guarantee that the process is carried out properly. Investing in technology and tools to automate and streamline the many procedures involved in managing overdue payments is also part of the picture.

Taken together, these efforts may assist businesses in developing a strong and successful AR process that matches their particular needs and objectives, enhances their financial performance, and ultimately assists them in achieving long-term success and profitability.

How Does AR Automation Work?

Accounts Receivable (AR) automation works by leveraging technology and software solutions to streamline and optimize the various tasks and processes involved in managing customer invoices, payments, and collections. Here’s how AR automation typically works:

Invoice Generation

AR automation begins with the automated generation of invoices. The system can pull relevant information from sales orders or contracts and create invoices in a standardized format. This reduces the need for manual invoice creation.

Customer Self-Service Portals

Many AR automation systems provide self-service portals for customers. Customers can access their invoices, review payment history, and make payments online, increasing convenience and reducing the need for manual interactions.

Payment Options

• AR automation offers various payment options, including credit card payments, ACH transfers, and electronic fund transfers (EFTs). These options make it easier for customers to pay invoices promptly.
• When payments are received, AR automation software matches them to the corresponding invoices, automating the reconciliation process. This reduces errors and saves time.
• The system can send automated payment reminders to customers who have outstanding invoices. These reminders can be scheduled at specific intervals to encourage timely payments.

Reporting and Analytics

• Automation provides real-time visibility into AR performance. Businesses can generate reports and analytics to track key metrics like Days Sales Outstanding (DSO) and customer payment behavior.
• AR automation systems are designed to ensure compliance with financial regulations and data security standards. This reduces the risk of fraud and ensures data integrity.

Audit Trail

Automation creates a detailed audit trail, which can be valuable for auditing and compliance purposes.

Why is Automating Accounts Receivable Becoming Standard Practice in Business?

Because the benefits of automating a manually handled account receivable process are undeniable. Let’s see!

Makes Workflow More Efficient

It cuts down on the time spent on paperwork and payments. Furthermore, a more efficient process allows the AR team to focus on higher-value strategic objectives.

Faster Invoicing

RPA enables automated operations to accelerate invoicing while reducing the company’s days of sales outstanding (DSO). Simply put, this means faster payments and better cash flow.

Better Data Accuracy

• As the data extraction procedure is automated, RPA bots assist in streamlining the accounts receivable process, eliminating invoice duplication, and minimizing billing disputes. To be honest, by relieving employees of the most mundane activities, automation software allows them to focus on forecasting cash flows and monitoring past-due payments.
• Before you begin with account receivable automation, consider the following commonly asked questions to optimize the value of your account receivable automation process.

How to Put AR Automation in Place

Moving from manual to automated AR demands a complete digital reorientation of payment processes.

Here are the Six Most Important Stages of Establishing AR automation:

Step 1: Gather Input From All Parties.

Discuss the existing receivables process with everyone involved. Learn how they perform their work exactly to aid with the move to automation, since software may be customized to each company’s demands. Bring in not only the AR team but also IT and management personnel. Consider interacting with clients with whom you do a lot of business to get more information. Once you start automating the AR process, you should check in with all stakeholders on a regular basis to see how they believe the deployment is going.

Step 2: Clearly Describe the Switch’s Aims.

Automatonophobia is the dread of human-like figures, such as robots built to seem like humans — and as artificial intelligence advances, some individuals may grow concerned about losing their employment to automation. As you use AR automation, explicitly explain your objectives. It’s possible that the long-term objective is for the company to extend its client base, or it’s trying to develop new jobs for employees so they can undertake more significant duties.

Step 3: Integrate Accounting Software.

After you’ve chosen and paid for an AR automation solution, the following step is to integrate it with your current accounting software. This will aid in the organization and alignment of existing accounts receivable data with the new system.

Step 4: Set Up Automatic Payment Reminders.

Remember that the primary purpose of AR automation is money collection. Setting up automated payment reminders for customers who owe money is a vital element of the automation process since it saves the AR team time. During this phase, you may decide when to send out payment reminders.

Step 5: Choose and Link Payment Methods.

There are considerably more ways to pay a bill now than ever before, so you should find out which payment systems and methods the organization accepts. Make those decisions, then use your program to implement the different solutions.

Step 6: Reconcile and Submit Your Findings.

With frequent accounts receivable reconciliation, you won’t bother or confuse your clients with unwanted payment reminders when they’ve already paid. You may utilize the reconciling process to analyze how well the automated process is operating and make any required improvements.

What are the Advantages of Accounts Receivable Automation?

Accounts Receivable (AR) automation offers several advantages for businesses looking to streamline their financial processes and improve efficiency:

Faster Payment Processing:

• AR automation speeds up the invoice-to-cash cycle by automating invoice generation and delivery. This means quicker payments from customers, resulting in improved cash flow.

Reduced Errors:

• Automation reduces the risk of human error in data entry and calculations, ensuring accuracy in financial records and reducing costly mistakes.

Improved Cash Flow Management

• With real-time visibility into outstanding invoices and payment statuses, businesses can better manage their cash flow, making it easier to plan and allocate resources effectively.

Streamlined Collections

• Automation tools can prioritize delinquent accounts, send automated reminders, and facilitate smoother communication with customers in arrears, ultimately improving the collections process.

Integration with Other Systems

• Many AR automation solutions seamlessly integrate with accounting software, ERP systems, and CRM platforms, ensuring data consistency across the organization.

Scalability

• AR automation solutions can scale with your business, accommodating growth without the need for significant manual intervention.

Strategic Insights

• By automating routine tasks, finance professionals have more time to analyze customer behavior, payment trends, and market dynamics, enabling better decision-making.

Reduced Days Sales Outstanding (DSO)

• Automation can help reduce DSO by expediting invoice delivery, improving collections, and providing insights into customer payment behavior.

What to do Next?

Velan Bookkeeping is a trusted partner for businesses seeking to enhance their operations through Accounts Receivable (AR) automation. With a proven track record of delivering cutting-edge solutions, we understand the transformative power of AR automation in improving efficiency, optimizing cash flow, and fostering stronger customer relationships.

Our dedicated team of experts is committed to tailoring AR automation solutions to meet your unique business needs. We recognize that every organization has distinct challenges, and we’re here to provide personalized strategies and support that ensure a seamless transition into the world of automation.

Frequently Asked Questions

Have a question in mind? We are here to answer.

1. What Size of Business Can Benefit from AR Automation?

AR automation can benefit businesses of all sizes. Small businesses can streamline operations and improve cash flow, mid-sized businesses can enhance efficiency and scale more effectively, and large enterprises can optimize complex AR processes for greater profitability. AR automation is a versatile solution adaptable to the needs of any business size.

2. Is AR Automation Secure?

Yes, AR automation can be secure when implemented properly. Robust encryption, access controls, and regular security audits can protect sensitive financial data. Choosing reputable automation providers with strong security measures is essential for safeguarding financial information.

3. How Can AR Automation Improve Cash Flow?

AR automation improves cash flow by expediting invoice delivery and payment collection, reducing the day’s sales outstanding (DSO). Automated reminders and customer self-service portals encourage timely payments. Efficient reconciliation and reporting enable better cash flow visibility and management.

For any business firm to blossom and grow, understanding customer demands and meeting their satisfaction is vital. To do this, the firm should maintain a healthy balance between the growing demands of customers and the increase in responsibilities that are bound to follow. This will strike the chords of harmony that will allow for the required growth and stability of the firm. And as the customer base expands, so will expand the need for lucid financial accounting that will have to be competently dealt with. An effective system of managing accounts will strengthen the financial base that will serve as the crux of the company’s foundational advancement.

Here, understanding the ebbs and flows of receivables will help in resourcefully identifying the various sources of revenue from which they are either generated or choked. This will also help in classifying the strengths and challenges of the company, providing kaleidoscopic insights to assess and channelize the productivity variants. The need to manage accounts receivable (A/R) only validates itself with these factors. An accounts receivables report can be used as a barometer to assess the financial health of a company in conjunction with accounts payable. It is not only about maintaining a record totally income generation but a system that can competently tackle dimensional issues of productivity is the key to strengthening your financial hold. Some of the perks and perquisites of timely management of accounts receivable are:

• It can help build stronger bonds with clients and customers.
• It will help sustain a healthy cash flow.
• It will help avoid delay in settling suppliers’ dues.
• It will earn interest in the respective bank account, as an added bonus.
• It will help in better prediction of cash flows.
• It will help ward off unforeseen expenditure without much hassle.
• It will help plan ahead and sketch prospects for the future,

The aforementioned points make up some of the crucial cornerstones that help build and sustain successful businesses. Cash flow management is highly critical for small businesses.

According to a study cited in Entrepreneur Magazine, a bank found that as many as 82 per cent of businesses fail due to cash flow management issues. As obvious as it may sound, one of the most effective ways to establish sustainable cash flow for your business would be to proactively manage your accounts receivable. Here are a few tips that can help avert a cash crunch and ease cash flow:

1. Assessment of Customer’s Credibility:

As much as it is important for a company to bring in new customers, it is also important for the company to study and assess the credibility of the customers.  Before extending credit, a company should have a mechanism in place that is both preventive and curative in nature and helps:

• Assess the credibility/creditworthiness of the customer.
• Provide conditions that clearly define the terms for A/R.
• Setup repayment timing and options as per remedial conditions.
• Plan around A/R patterns, with available customer patterns.

2. Prompt and Punctual Invoices:

Prompt and punctual invoices are a pleasure to the eye. Customers dread lingering amidst the uncertainty between the payment gateway and the acknowledgement of payment for a certain service.  On a basic level, promptly sending your invoice reinforces the image of your company as professional and thorough. It also subtly notifies the seriousness you attach to payments. Customers are less likely to delay payments to a company that takes accounts receivable seriously.

3. Monitoring Accounts Receivable:

Generally, upon the reception of the invoice, customers are given a certain window to settle the due. Setting up a robust calendar-like mechanism that not only tracks individual deadlines but also alerts for appropriate follow-up actions will help forecast the incoming cash flow better. Follow-ups can help reveal oversights, payments lost in the mail or other issues. It can also flag a problem early in the process so that you can determine the best way to move forward with collecting payments.

4. Collections and Corrective Actions:

With a proper follow-up mechanism in place, foreseeing an account heading towards trouble becomes easy. In such a scenario, preventive or corrective measures can be initiated accordingly. There are numerous ways in which delayed payments can be handled. For example, granting a brief grace period in exchange for a minimal interest or a convenience fee. There can be a multitude of scenarios that may ensue along these lines. An early understanding of these issues will help reduce unnecessary ramifications.

Auto-Pilot: Velan Bookkeeping

Caught in a myriad of impending deadlines that have you reeling under pressure? With so many lines of records to keep track of, losing sight of the bigger picture? Sit back, hit the “Auto-Pilot” button, and grab that coffee you never could make time for.

Velan bookkeeping, with highly experienced accountants at your disposal round the clock, we cater to all your accounting needs.  From notifying you at the earliest onset of any account heading south, all the way to drawing up sensitive, concurrent remedial measures, we’re in for the long haul. Breaking it down, some of the services we offer are:

• Timely generation of invoices and effective distribution;
• Follow-ups and Co-ordination with collections team when necessary;
• Generation of reports, predictions, and forecasts;
• Receiving and logging payments;
• Maintaining efficient archives.

Call us today! And unshackle yourself from the cataclysmic commitment of chasing deadlines.

Phone: +1-860-215-4997
E-mail: [email protected]

The order-to-cash/Accounts Receivables cycle in businesses is full of complexities. There are too many interactions that take place in the OTC/Accounts Rceeivables cycle and there is always room for Cash Process Efficiency enhancements in the process. True setback comes from the reliance on the hackneyed manual processes and the absence of a smooth transactional information flow. These are the major impediments that contribute to the inefficiencies and the increased operational costs.

It is established that there are quite a lot of interactions involved in the OTC/Accounts Receivables cycle. It is significant to note that papers are an inevitable part of the information flow between the company and the third party vendors, thus being responsible for the inefficiencies and challenges in the performance. Computerized receivables have been in use for over 5 decades now yet there is an incorrigible reliance on the paper and manual based processes. This is due to the fact that there is no connectivity between the internal functionalities besides the flow of accounting information and sales, inventory, shipping, and receivables. Things get exacerbated when there is an input is required from the customers or other third party vendors during the intermediate processes.

Manual tasks are still being used in bridging the gap between the Receivables processes and the external parties and this imposes the biggest challenge. Though there are software like ERP (enterprise resource planning) are widely used now to provide the integration that is lacking in the manual processes, manual processes are still being used. So, what is the result? A lot of time and labor are being invested in the OTC process, increasing the costs and operational inefficiencies.

How do we go about increasing the Order to cash/ Accounts Receivables efficiency?

You need to build strong connections between all the internal processes and wire them in an automatic process. The only hitch you might be facing is the expenses. Plus, it would also require some rewriting of the interfaces when you upgrade the systems. Luckily, cloud-based solutions increasingly seem to address the issue at hand. Cloud-based solutions also provide much stronger connectivity links between all the participants, be it internal or external. Now, this is more affordable than any other hosted or licensed solutions out there.

Advantages of Automated processing:

• Customer payments can be accelerated due to instant accessibility of bills and other data
• Invoice chasing can be streamlined
• Customer disputes can be prevented
• The need to re-key order information can be removed
• Scanning and filing of invoices can be eradicated
• Storage costs can be reduced
• Office space will be freed

Should you require help with enhancing your OTC efficiency, do contact at +1-860-215-4997.