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What is Accounts Receivable (AR) Automation? Boost Your AR Efficiency

Posted on 20/09/2023

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.


  • 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.

  1. 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.

  1. 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.

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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