How to avoid common mistakes in accounts receivable?

As an accounts receivable (AR) manager or CFO, you know just how vital it is to manage the funds owed to your company. Accounts receivable not only impact your cash flow but also determine your company's ability to expand, stay profitable, and sustain business operations. However, managing AR is no easy feat—particularly as your business grows, scales across borders, and handles transactions in multiple currencies. The manual processes often involved can lead to inefficiencies, cash flow delays, and accounting errors that put unnecessary strain on your finance team.

In this article, we explore the common mistakes businesses make in their accounts receivable processes and provide solutions to overcome them. Whether you’re handling receivables manually or using separate systems, it’s time to consider automating your AR processes to reduce errors, improve cash flow, and free up time for more strategic financial tasks.

The Growing Complexity of Managing Accounts Receivable

As businesses expand, the complexity of managing accounts receivable grows with them. More clients, increased sales, and handling payments in multiple currencies can make the AR process increasingly difficult. Despite the growing complexity, many companies still handle receivables manually or use outdated systems. According to Barclays, 58% of UK SMEs face cash flow issues due to unpaid invoices—a significant challenge for companies of all sizes.

So, what are the most common mistakes companies make with their accounts receivable, and how can automation solve these issues?

Common Accounts Receivable Mistakes and How to Fix Them

1. Mistakes on Invoices

One of the most frequent issues with accounts receivable is generating incorrect invoices. Errors can occur for various reasons: outdated client information, internal miscommunication, or simple human error. Mistakes such as incorrect billing amounts or wrong client details can result in delayed payments and strained relationships with customers. The longer these errors go unnoticed, the more they impact your cash flow and your ability to generate accurate financial reports.

Solution: To eliminate invoicing errors, you should automate the process with a dedicated AR solution. Automated tools store and update client information in real-time, ensuring invoices are sent to the correct department and with the right details. This reduces the risk of human error and speeds up the invoicing process, allowing your team to focus on higher-level tasks.

2. Duplicate Invoices

Another common mistake is the creation of duplicate invoices, which often occurs when multiple team members are handling accounts or when using disconnected systems. Duplicate entries can lead to inaccurate financial reporting, cause confusion in the reconciliation process, and ultimately damage client relationships.

Solution: A dedicated AR tool that integrates with your accounting system can prevent duplicate invoices. Automated systems flag duplicate entries and prevent them from being processed, ensuring data integrity across your finance operations.

3. Late or Missing Payments

Late or missing payments can significantly disrupt cash flow and hinder your business's ability to operate smoothly. The longer it takes for customers to pay their invoices, the more your business’s working capital is affected. This challenge is typically measured by Days Sales Outstanding (DSO), which reflects how long it takes for a company to convert credit sales into cash. A high DSO indicates that customers are slow to pay, limiting your access to funds for day-to-day operations or growth initiatives.

Solution: To reduce DSO and accelerate payment cycles, automation is key. AR automation solutions can send payment reminders to customers before the due date and provide easy-to-use payment links to facilitate faster payments. Offering multiple payment options can also help speed up the process. Additionally, implementing early payment discounts can incentivize customers to settle their invoices sooner, improving your overall cash flow.

4. Reconciliation Issues

Reconciling payments manually is a time-consuming and error-prone task, especially when handling a high volume of transactions or payments of the same amount from the same client. Manual reconciliation often requires your team to meticulously compare payment records with invoices—a process that becomes more complicated as your company grows.

Solution: By automating the reconciliation process, you can save time and reduce errors. An end-to-end AR tool like Fyorin can automatically match incoming payments with the corresponding invoices in real-time, reducing the administrative burden on your team. This not only speeds up the reconciliation process but also provides you with a clear, real-time overview of your incoming cash flow.

5. Inability to Collect Payment in Desired Currency

If your business operates internationally, you likely face challenges with collecting payments in different currencies. This can lead to delays due to fluctuating exchange rates and complicated reconciliation processes. Not being able to collect payments in the currency of your customer often results in extra fees and further cash flow delays.

Solution: The best way to streamline cross-border transactions is by using a financial operations platform that allows you to collect payments in your customers’ preferred currencies. Platforms like Fyorin provide access to multiple currencies, which not only speeds up the payment process but also reduces the costs associated with foreign exchange fees. This is especially beneficial as your company expands into new markets.

Automating Receivables with Dedicated AR Software

Managing accounts receivable manually or using separate systems is no longer sustainable for businesses looking to grow and optimize their financial operations. By automating the AR process, you can reduce manual workloads, improve cash flow, and minimize errors in your financial reporting.

An automated AR solution allows your finance team to promptly record incoming payments and match them with outstanding invoices, reducing the likelihood of missed payments or reconciliation errors. It also gives you a better understanding of your cash flow, making it easier to plan for growth and manage working capital efficiently.

According to Capgemini, companies that implement automation in their accounting and finance processes can reduce their operating costs by 25 to 45 percent. This significant reduction in costs, coupled with the increased efficiency of automation, makes it clear that investing in AR automation is a smart business decision.

Fyorin: Your Partner in Global Accounts Receivable

At Fyorin, we understand the complexities involved in managing accounts receivable—especially for businesses operating globally. Our end-to-end AR solution allows you to not only get paid faster but also improve operational efficiency by offering a range of features that streamline your receivables process.

With Fyorin, you can:

• Automatically reconcile paid invoices in your accounting system, reducing manual work.
• Eliminate invoicing errors by generating invoices directly from the platform.
• Improve cash flow by sending automatic payment reminders for overdue invoices.
• Collect payments in over 220 currencies, enabling you to grow globally without friction.
• Gain real-time visibility into your incoming funds and improve financial reporting.

Our platform integrates seamlessly with popular accounting tools such as Xero, QuickBooks, NetSuite, Zoho, Microsoft 365, and Sage, making it easy for your finance team to adopt and use. If you're ready to automate your accounts receivable process and unlock the benefits of faster payments and reduced costs, feel free to reach out to me directly and we can discuss how Fyorin can help you.

Conclusion

Managing accounts receivable is essential for any growing business, but doing it manually or through disconnected systems can lead to inefficiencies, errors, and cash flow issues. By automating your AR processes with a dedicated platform like Fyorin, you can streamline operations, reduce errors, and improve your cash flow management—giving your finance team more time to focus on strategic growth initiatives.

Don’t let outdated systems hold you back. Embrace automation and take control of your company’s financial future.