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How accounts receivable automation delivers value for business

The following is a guest post by Stacy Dubovik.

Account receivables are a critical area that organizations cannot afford to overlook. This financial segment of business operations, known as account receivables or AR, refers to the payments customers owe for the goods or services a company has provided.

A small AR department or accountants generally manage accounts receivable. Organizations that don’t closely manage accounts receivable are at higher risk of unexpected cash flow problems.

Luckily, there is a solution that can help businesses manage accounts receivable with ease: automation.

Accounts receivable automation involves automating various tasks usually handled by the AR team. This includes automating invoicing, processing payments, managing collections, and handling credit management.

By implementing accounts receivable automation, an organization can streamline its financial processes, reduce manual entry errors, and save time and resources. Through automation, a business can focus on achieving its growth objectives and providing outstanding customer service instead of being overwhelmed by the details of managing accounts receivable.

Invoice and financial statements through reading glasses

Benefits of accounts receivable automation

Accounts receivable automation is growing at the same rate as other automation technologies, with a CAGR of 13.3% until 2030.

AR automation solutions have become increasingly popular among businesses of all sizes and for a good reason. The benefits of automating your accounts receivable processes are numerous and can positively impact your business’s overall performance.

Let’s take a closer look at the top five advantages of accounts receivable automation to understand better why it’s getting more and more attention from organizations.

1. Improved Cash Flow Management

With accounts receivable automation, you can accelerate payment processing, reducing the time it takes to receive customer payment. When an organization automates the management of customer credit accounts, it can improve the overall cash flow and provide greater predictability in financial planning.

2. Reduced Manual Errors

Whenever complex tasks, especially involving data entry or numbers, are handled manually, there is the potential for errors. Errors with financial consequences can majorly impact the business’s revenue and cash flow over time. These costly mistakes can set the organization back financially while impacting its reputation.

3. Enhanced Customer Experience

By offering convenient tools, account receivable automation solutions can help organizations improve their overall customer experience. For example, an online customer portal where customers can view their payment history and outstanding invoices can enhance customer satisfaction.

Customers today expect a seamless online payment experience, which is much easier to offer with automated AR. Customers who can quickly pay their charge accounts are more likely to retain their accounts with the company.

4. Better Financial Analytics

Automated accounts receivable systems can provide you with real-time data and analytics, allowing the business to analyze its financial performance more effectively and with greater control.

Organizations can track payment trends, identify problem areas within accounts receivable, and make data-driven decisions when implementing AR automation. With these improved oversight and financial analysis tools, businesses can develop a robust financial strategy.

5. Increased Efficiency and Productivity

Not every accounts receivable task can be handled with automation, but AR automation can still indirectly help staff handle these tasks. Because automation streamlines or eliminates many manual tasks, staff can spend more time on complex critical business functions.

Ultimately, this increases productivity and efficiency, helping businesses achieve more with fewer resources.


Types of Accounts Receivable Automation

There are several types of accounts receivable automation available to organizations looking to add an AR automation solution to their toolkit, including:

  • Electronic Invoicing – replaces paper invoices with digital ones that can be sent directly to customers’ email addresses. This speeds up the payment process and reduces manual errors.
  • Payment Processing Automation enables customers to pay online through a secure portal or by integrating with a payment processor such as PayPal. This simplifies the payment process for customers and improves cash flow for businesses.
  • Collections Management – automates the process of following up with customers who have outstanding balances. It sends reminders and notifications to customers, improving the likelihood of payment and reducing the need for manual follow-up.
  • Credit Management – helps to evaluate a customer’s creditworthiness, determine credit limits, and manage credit terms. This reduces the risk of bad debt and improves the efficiency of credit management.

Implementation of Accounts Receivable Automation

As businesses grow, managing their accounts receivable becomes more and more daunting. Invoicing, tracking, and managing payment disputes take up a significant amount of time and resources as customer accounts increase.

Companies increasingly use automation to streamline their accounts receivable processes to mitigate these issues. Implementing accounts receivable automation requires a well-thought-out plan considering multiple factors, from the business’s unique situation to end-user adoption of the automation tools.

Before implementing any new technology solution, a business should assess its unique needs and outline what it hopes to get from the new tool. This includes identifying the pain points in the current accounts receivable process, defining the goals and objectives of automating AR tasks, and identifying the resources necessary for implementation.

Once the business needs and expectations have been outlined, it’s time to select the automation solution. This is a critical step in which the organizations should consider several factors before making a decision, such as the cost of implementation, the level of customization required, and the compatibility of the solution within the business’s existing systems.

The integration process can be challenging, as the business may have to contend with compatibility issues, data migration, and system updates. This takes careful planning to execute without significant disruptions to business operations.

User adoption is one of the most critical aspects of implementing accounts receivable automation. Employees must be adequately trained and educated about the new system’s functionalities to ensure that the solution is fully utilized.

Challenges of accounts receivable automation

Despite the benefits of AR automation, there are several challenges that businesses must overcome when choosing to go down this path:

  • Resistance to Change – Employees often resist change, as they may fear how it will impact their day-to-day processes or feel more comfortable with a system they have been using for a long time. Resistance to change can lead to slow adoption and even conscious or unconscious sabotage of the implementation process.
  • Security and Data Privacy – Any automation solution an organization chooses must be secure and protect sensitive data. Cybersecurity threats are more serious than ever, and businesses are more pressed to secure their systems and remain compliant with all privacy regulations.
  • Integration with Legacy Systems – Integrating new automation solutions with legacy systems can be challenging. Compatibility issues are common, and data migration can be complex and risky. Organizations should have a backup plan in case of a critical compatibility problem or unexpected data loss.

Embracing automation

As the business landscape rapidly changes, businesses must adapt and embrace automation tools or get left in the dust. This isn’t the early 2000s anymore; it’s 2023: time to handle processes like AR efficiently and effectively. Accounts receivable automation is no exception, providing businesses with significant value and benefits that can significantly improve their financial operations.

Given the advantages of automation, from faster payment processing to improved efficiency, businesses that implement accounts receivable automation can expect to see a positive impact on their bottom line. In addition to enhancing the business’s financial posture, automation can improve the customer experience, increasing customer satisfaction and retention rates.

By embracing automation solutions that streamline their operations, businesses can focus on other critical areas of operation and achieve more with fewer resources and staff.

  • Stacy Dubovik

    Stacy is a Financial Technology and Blockchain Researcher with ScienceSoft. Stacy joined ScienceSoft in 2020, bringing in her expertise in large-scale digital transformation projects and practical knowledge of the finance domain. Stacy frames ScienceSoft’s service offerings and technology guides in corporate finance, BFSI, DeFi, and blockchain. She works side by side with business analysts, software architects, and developers to help create innovative solutions that bring unique client value. Stacy continuously monitors customer expectations and technology trends in the BFSI market and explores the newly-emerging fintech and blockchain products.