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How to Automate Your Accounts Receivable Process

Posted on 14/11/2023

Accounts receivable (AR) teams often need assistance with manual operations. These consume time and money, lead to mistakes, and result in lost papers and compliance violations. However, automating AR procedures may alleviate these issues while also increasing the AR team’s productivity. AR automation advantages include lower DSO and saving time for financial closure, allowing teams to focus on higher-value operations.

There has long been widespread concern that automation may cost accounts receivable (AR) personnel their jobs. But that fear is proving unjustified.

AR departments all across the globe have the same issue: time. It never seems to be enough.

CFOs and their teams often devote 90% of their time to financial closure. Manual operations, such as sending bills and rectifying billing errors, eat up time that might be spent analyzing data and designing competitive workflow strategies.

Other issues that financial professionals associate with manual processing include missing papers, regulatory violations, and productivity.

Spending time on these time-consuming tasks does not ensure success. Organizations of all sizes struggle to be paid on time across sectors. Over 10% of payments in 26 sectors are more than 90 days overdue, according to AR teams.

AR administration can no longer be done only by hand. It is not sustainable. However, automation has the potential to flip the tide.

Continue reading to understand how to automate and streamline the manual AR process.

What precisely is Accounts Receivable Automation?

When transitioning from a manual to an automated AR process, collaboration is essential. Putting in place a good accounts receivable automation system has multiple moving elements. You are not converting a manual procedure to a digital format. That’s what an ERP is.

It’s tempting to imagine that a good ERP system will fix these issues. However, a cutting-edge ERP will only save time if it has an automation component.

For efficiency, you must realign your payment processing approach and collaborate with your AR team, IT department, third-party providers, and management team.

Learn more about the advantages of automating accounts receivable in our eBook.

Why Should Accounts Receivable Be Automated?

Accounts receivable automation entails more than just introducing digital payment choices and hoping your customers pay on time. AR automation should cut expenses and DSO time while freeing up working capital and offering valuable data.

To promote quick payments, it should also provide a smooth and adaptable consumer experience. The simpler it is to fill out an invoice, the faster your customer’s accounts payable department will make the payment.

The appropriate AR automation software may help you save time on financial closure and free up your staff for higher-value work. According to a B2B payments survey, firms that automate AR procedures reduce their DSO by 23 days. AR teams can complete operations 87% quicker with automation, and 79% feel it increases team productivity.

What is the first stage in establishing an automated accounts receivable system?

The first stage in implementing an automated AR system is mapping out the process, key goals, and critical bottlenecks. This might be the most time-consuming component of the process, particularly if your company has many levels of invoicing complexity.

It is critical to map your process in order to determine which capabilities you require from accounts receivable automation software. It will determine which manual processes can be automated and which must be done by hand.

Begin with a specific aim in mind. This will influence your future actions. For example, better analytics might be used to streamline operations, automate jobs, or acquire insight.

Working with your team to build a procedure and begin the process of automating accounts receivable It is now time to define the general objectives and needs.

To begin, consider the following objectives:

  • Reduce inefficiency.
  • Reduce transaction costs.
  • Remove any suspicious accounts.
  • Accelerate payment processing
  • Increase client satisfaction
  • Maintain a steady cash flow by offering reasonable payment conditions.
  • Increase your organization’s visibility
  • Connect to important business systems

In the long term, well-stated objectives and circumstances make the review process much simpler.

20 questions to assist you in documenting your AR process

  1. How does the team get customer and invoice information?
  2. How do we deliver customer invoices?
  3. What data inputs do we collect for clients and invoices?
  4. How many billing configurations do we provide?
  5. What are our ideal payment conditions, and how does our approach help to make them easier to meet?
  6. How do we handle payments from customers?
  7. When a payment is late, how do we know?
  8. What do we do with late payment notifications?
  9. Can you readily track down late payments?
  10. Which payment methods do our consumers prefer?
  11. What percentage of the cash cycle is automated?
  12. Will the program work with your ERP system?
  13. Is your augmented reality solution equipped with fraud-prevention technologies, such as real-time verification?
  14. How is the client’s experience?
  15. Do we charge a fee for credit card transactions?
  16. Do we levy a late fee?
  17. Can you promote certain payment modes with no-fee incentives?
  18. What type of information does the platform gather?
  19. Is the program compatible with PCI-DSS?
  20. What are the user data security protocols?

Before You Automate Your AR Process, Here Are Some Best Practices

  • Create a diversified team. Look for individuals with diverse backgrounds who are comfortable using new technologies and techniques. Rather than becoming mired in analysis and antiquated procedures, they ought to be open to common sense remedial solutions.
  • Involve employees in decision-making. Your accounts receivable staff is well aware of the complexities of AR operations. Make use of their expertise by having them lead you through the current AR process.
  • Make cross-collaboration a must. When individuals collaborate, they have a deeper understanding of each other’s issues and talents, which improves cooperation.
  • Encourage experiments. It’s possible that you won’t discover an accounts receivable automation technology that works for your team on the first attempt, and that’s OK. Instead, focus on tiny projects that allow for fast tests and shorter feedback cycles.

Evaluate Your Software Options

Look for evaluations of AR automation tools and chat with your colleagues about their choices. Make a shortlist of AR systems and request that they evaluate it or offer an RFP.

Request a demo of the functionality and cost that you desire, depending on your specifications. Request that some of your AR pros join you on the call. Some companies will even provide a customized data test.

Our Bookkeeping Experts are here to help.

Remember to include your present systems so that they can estimate the transfer time, development labour, and expenses. These inputs will assist you in better comparing AR automation technologies and quantifying future expenditures.

Obtain Decision-Makers’ Support

Gaining buy-in from people who make decisions is critical if you are not the only one. Contextualize your request to align with the aims of the company.

Assume your organization wants to reduce operating expenses by 10% next year:

  • The CMO wants to have a consistent brand presence.
  • The CTO wants PCI Level 1 compliance.
  • The CCO wishes to raise NetPromoter scores by one point.

It is up to you to demonstrate how automated AR will help you achieve these objectives.

It will be easier to persuade peers and superiors if you can clearly answer the question “What’s in it for me?” But that’s not all:

  • Timing is everything. Think about the optimum moment to deliver your argument. Linking AR automation, for example, to a new company
  • Participate in your pitch with others. Showing that your bosses are already on board with your proposals can help your argument.
  • Always provide solutions. One of the most effective methods to influence change is to demonstrate that you’ve discovered a solution.
  • Provide specific figures. Estimate cost savings from lower transaction fees or fewer overdue accounts.

Choosing the Most Appropriate Accounts Receivable Automation Software

With the right automation software, invoice processing costs can be reduced by up to 80%. Companies that invest in accounts receivable automation tools also get paid quickly. Customers using Velan bookkeeping may reduce DSO by up to 60% and solve cash flow bottlenecks in AP operations.

The time and effort you put into automating AR will pay off handsomely. Are you ready to join these forward-thinking businesses in cutting expenses, eliminating transaction fees, and simplifying collections? Request a free demo from one of our specialists now!

Topics: Accounts Receivables




About the Author:

Pramod has over 11 years of experience relating to finance and accounts in diversified industries. He is an expert in resource and process optimization resulting in greater operational efficiencies.

Author can be reached at [email protected]

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