Accounts Receivable Automation: Transform your B2B Invoicing and Payments

The adage ‘Cash is king’ remains a timeless truth for any business, big or small.?

Without cash, a business can’t pay its bills or operate smoothly. The accounts receivable cycle focuses on collecting this cash from sales. Therefore, managing accounts receivable well, from invoicing to collections to reconciling payments, is crucial for any business. Yet, these tasks can be time-consuming and challenging, for businesses of all sizes.

Finance leaders must assess whether hiring people and training them to manage accounts receivable makes more sense or adopting accounts receivable automation.?

Here, we’ll explore the ins and outs of accounts receivable automation to help you decide whether it’s a good option for your organization.??

But first — what is AR automation? Let’s clarify the term before delving deeper.?

What is AR Automation???

In its simplest terms, AR automation is exactly what it sounds like. It’s a way of automating repetitive, tedious tasks in the accounts receivable process that will help finance teams collect money faster from the customers who owe it to the company and to apply cash instantly once it is received so that buyer limits are released for future orders. AR automation requires little to no human interference and employs AI-based models to speed up the invoice-to-payment cycle.???

AR automation streamlines the following tasks:??

• Invoicing – Automatically creates and delivers timely invoices and provides real-time visibility over invoice status. ?
• Collections Management – Sends automated follow-ups and prioritizes high-risk accounts for the collectors.??
• Payments – Provides a self-service payment portal for customers that accepts multiple modes of payment, such as ACH, wire transfers, and more.??
• Cash Reconciliation – Automatically extracts remittance details, reconciles the payments, and posts it directly to ERP.??
• Deductions Management – Auto-identifies deductions and categorizes them along with the reason codes.?

Accounts Receivable Management: Key Challenges in Manual AR Operations??

Accounts receivable management is challenging, especially for businesses relying on outdated manual operations. In the absence of the right tools and technology to support this process, finance teams encounter several challenges:

• Time-consuming processes:???

Finance professionals spend nearly 80% of their time every year on repetitive AR tasks that aren’t productive. Take manual cash application, for instance. It entails downloading remittance data from various sources, extracting details, inputting data into spreadsheets, and manually matching payments—an extremely time-consuming process. Similarly, tasks like invoicing, collections management, and deductions management demand significant time and resources.?

• Error-prone nature of AR operations:???

Manual AR operations increase the likelihood of errors, leading to invoicing, payment processing, and financial reporting inaccuracies.??

For instance, finance teams often make data entry mistakes while capturing invoice information. It’s one of the most common mistakes made in accounts receivable. With AR teams frequently dispatching multiple invoices daily, the likelihood of inputting incorrect invoice numbers, erroneous amounts, or overlooking cash discounts amplifies due to oversight errors. Consequently, erroneous invoices lead to payment delays as addressing customer inquiries for clarification consumes time. Only upon rectifying and reissuing the invoice can payment be expected from the customer.?

• Inconsistent customer communication:??

Managing high-risk accounts requires several follow-ups, and failing to do so can lead to non-payments and extended DSOs, severely impacting cash inflow. However, the manual approach to collections management often results in AR teams neglecting regular follow-ups on overdue invoices, primarily due to the vast volume of accounts.?Communication with customers regarding overdue payments gets inconsistent and delayed without automated systems.?

• Limited visibility across AR functions: ??

Many businesses still rely on the traditional approach of creating reports manually from Excel to analyze AR insights. This report fails to offer real-time insights and complete visibility into AR health, hindering proactive decision-making for financial management. This makes gaining insights into cash flow trends, customer payment behavior, and collection performance difficult, and the AR data often remains underutilized.?

Benefits of Accounts Receivable Automation??

Accounts receivable automation drives transformational outcomes for businesses. Here is a list of the top four benefits that AR automation provides:?

1. Improves team productivity?

“With AR automation, finance teams can process functions 87% faster.”????

AR automation frees your finance teams from manual, time-consuming tasks such as cash reconciliation, invoicing, etc. It creates a more efficient workflow and lets your team focus on strategic work to help the business excel. AR automation completes the entire process of generating and delivering invoices within seconds. For cash reconciliation, an automated solution quickly matches payments to invoices, enabling straight-through processing and enhances the overall efficiency. It empowers lean finance teams to manage AR operations efficiently without work overload. ?

2. Eliminates manual errors?

AR Automation eliminates human errors from AR management, such as oversight errors in cash reconciliation or invoicing errors. It ensures there are no duplicate invoices or billing disputes.???

With AR automation, data entry is fully automated, which means information from invoices is extracted and populated into the system, eliminating the potential for typos or transposed numbers. Furthermore, AR automation solutions seamlessly matches payments with corresponding remittances, ensuring accuracy and mitigating errors in payment matching. It also ensures correct cash discounts are applied to the orders. By eliminating these manual errors, AR automation software significantly facilitates faster payment processing and accelerates cash flow.?

3. Enhances customer experience?

AR Automation enhances customer satisfaction for business by providing a hassle-free payment experience with advanced functionalities, such as self-service payment portals, multiple payment options, and more. ??

Automated payment alerts and notifications promptly flag discrepancies and high-risk accounts, preventing overdue payments from slipping through unnoticed. AR automation solutions send timely payment reminders to customers about overdue payments and available cash discounts, encouraging them to pay sooner. Automated communications and reminders allow businesses to engage with customers and encourage payment without making a single collection call.?

4. Provides complete visibility ? ?

AR automation provides businesses with better and faster reporting with rich AR insights by extracting information from ERP and creating reports out of it. It eliminates data silos by providing real-time access to data across the order-to-cash process. This 360-degree visibility allows finance leaders to assess AR health and analyze team productivity metrics.??

For example, Finance teams can access the aging reports, which helps them identify slow-paying customers and optimize their collections efforts accordingly.???

AR automation also improves the accuracy of cash flow forecasting by providing real-time information on invoice statuses and outstanding balances. Finance leaders can leverage this data to make informed decisions to improve financial planning.?

Accounts Receivable Automation Software: How to Select the Ideal Solution??

Choosing the right AR automation software is a critical decision for your business. Getting it right the first time can save you time and money and prevent the need to switch to new software.??

To ensure you select the ideal solution, here is a step-by-step guide:??

Must-have Features in your Automated Accounts Receivable Process??

We’ve identified the must-have features in an automated Accounts Receivable process to help your business optimize working capital.???

1. Invoicing & Payments??

• Automated generation and delivery of invoices to customers via emails or directly to customers’ AP systems.????
• Self-service portal for customers that enables them to make payments in their preferred format and track their invoices.???

Read the full blog: https://globalpayex.com/resources/blogs/ar-automation/