Your company’s financial health needs to be taken into account in the same way that we try to eat healthily, exercise frequently, and put our well-being first. Optimizing the handling of accounts receivable is part of this.
Thanks to AR automation, this doesn’t necessitate as much time off, a stringent diet, or intense exercise!
This guide will walk you through the following:
Accounts receivable automation: what is it?
How can it support financially sound organizations?
The advantages of automating accounts receivable.
What are the best ways to speed up cash flow?
Let’s dive in!
What is AR Automation?
The secret to simplifying, easing, and reducing the stress associated with your company’s financial life is accounts receivable automation, or AR automation. To assist your company, get paid on time, it all comes down to utilizing the power of finance and accounting automation to streamline the laborious, repetitive, and manual procedures and duties that are commonly found in accounts receivable activities.
Consider the following: posting of payments, reconciliations, negotiations, tracking of invoices, reporting, and tracking of payments. You don’t have to toil diligently over these chores anymore. Rather, accounts receivable automation handles it using technologies such as machine learning (ML), robotic process automation (RPA), intelligent automation (IA), and artificial intelligence (AI). Additionally, it can work in tandem with other automations, including the automation of sales order processing.
The outcome? Better cash flow management, less administrative work, a greater competitive edge, and eventually a more positive financial picture for company executives.
How Does AR Automation Work?
Automation relies on cutting-edge technology, which combines ideas like cloud computing, machine learning, artificial intelligence (AI), and data analytics to create automation tools.
You can configure and modify these in your accounting software or in a specialized accounts receivable automation program that works with it. You simply need to ensure that all of the components, such as bank accounts, accounting software, and payment gateways, are configured and linked.
Benefits of AR Automation
According to PYMTS research for American Express, there is still much space for improvement, even if there has been some success in the US toward automating receivables. More than a third (33%) of US businesses still use manual procedures, and nearly half (44%) have only automated a small number of AR tasks.
One of your company’s most labor-intensive and meticulous divisions is finance; therefore, it’s critical that your bookkeeping data is correct and current. Using accounts receivable automation offers your company other advantages beyond just automating the most tiresome procedures.
● Making Better Use of Resources
The AR process uses resources, just like any other corporate activity. The advantages of accounts receivable automation enable businesses to reallocate resources from costly human labor to reasonably priced digital automation.
Your business can cut down on the amount of time spent on the accounts receivable process by implementing automated workflow improvements. As a result, you can allocate important financial and human resources to other areas that support their ongoing expansion.
● Sending Out Invoices More Quickly
Invoicing takes up a large portion of the AR process. AR invoice automation can automatically extract information from the pertinent work and purchase orders under a specific account, eliminating the need to gather data from customer accounts each time an invoice is needed.
Either paperless or traditional billing methods can then be used to automatically send the generated invoices to customers. Ebilling automation’s entire synergy makes the process simpler for both parties, benefiting your AR team and consumers.
● Reducing DSO
One of the most crucial KPIs in AR is days sales outstanding (DSO). It’s the typical amount of time the business needs to collect payments. Businesses can see DSO build up to weeks of extra time on top of the typical net 30 days.
DSO may be significantly impacted if AR automation is implemented to better handle consumer payments. Businesses that use automation have an average DSO that is 23 days lower than those that continue to use paper-based business procedures, according to research from PYMNTS and American Express.
● Increasing Cash Flow
A potent tool for enhancing cash flow in a number of ways is robotic process automation. Automation handles many small activities that maintain a corporation’s profitability without requiring a large investment of resources, such as preventing bad debts or identifying fraud.
● Eliminating Human Errors
Accuracy is just as important in accounts receivable as speed. Products and services may go underpaid if appropriate billing and collections are not maintained. Even small human errors can have significant financial consequences, and traditional accounting methods are frequently ineffective in spotting errors.
The likelihood of human error is reduced by automation. It gets rid of simple, repetitive processes like managing and aggregating values. Whether it’s a small typo or a value entered incorrectly, a single human error can spread across the entire process. Automation of accounts receivable prevents such occurrences.
Simplify the Credit Management Process
Maintaining good customer relations with your clients depends on letting them open a line of credit to use at your company. However, it’s also a significant trap that, if credit management through accounts receivable isn’t done correctly, can result in costly and time-consuming collections procedures.
Automated monitoring and notifications allow credit management measures to be applied as intended. Without having to worry about invoices slipping through the cracks because of human mistakes, businesses can easily track all credit provided to specific clients. Customers will receive automated notifications when it’s time to make a payment.
Also Read: Autonomous Revenue System: The Future of B2B Revenue Operations
AR Automation Best Practices
Here are some best practices to keep in mind while putting your new solution into effect if you want to maximize the benefits of AR automation:
● Prioritize stakeholder consultation
This covers your customers, clients, and, above all, your employees. People will need reassurance because it’s normal for them to fear losing their jobs to automation and artificial intelligence. You can outline the advantages, the implementation objectives, and emphasize how automation can actually free up employee time for more engaging, rewarding, and valuable work.
● Pick your software wisely
Verify that it functions as you need and want it to and that it connects with other programs, such cloud accounting software. Make sure the remainder of the package fits the demands of the company if you’re utilizing accounting software with automation functions built in. Last but not least, consider your clients’ requirements and preferred payment options.
● Arrange the automation processes according to your AR workflow
The chronology of everything that must occur between rendering a service to a client and receiving payment for it is known as the AR process workflow. You must ensure that automation provides a benefit over a human performing the activity at each step.
Keep in mind that there are situations in which practical experience in finance or accounting is required.
● Test, test, and repeat
When putting AR automation into practice, it’s common to see glitches, but they may be fixed. To ensure that everything is correctly configured and tested, it is worthwhile to invest time in advance.
Closing the Chapter
AR automation improves your financial performance by streamlining processes, lowering errors, and easing cash flow issues. It improves the efficiency of your accounting function, reduces expenses, and builds solid client relationships. It’s like a fitness program that works for you.
By putting accounts receivable automation solutions into place, you’re not merely putting an end to cash flow issues; rather, you’re beginning a brand-new book that centers on your company’s long-term stability, growth, and success.
