Beginner's Guide to Accounts Receivable Automation

Accounts receivable automation is a growing trend for companies that are choosing to undergo digital transformation - or incorporating more technology into their business. In this article, we’ll answer some of your biggest questions, including:

What Is Accounts Receivable Automation?

Automation replaces manual processes, and automating accounts receivable involves replacing some aspects of accounts receivable management with technology to streamline financial transactions and modernize processes.

Traditionally, accounts receivable management has been a very manual, labor-intensive process. These tasks can be very time consuming – imagine a person working in the collections department emailing customers one by one to send them their account statement with a friendly reminder that their payment is due soon. This person maintains a spreadsheet with all the past due accounts, including each and every invoice and each and every payment. Another person who handles cash application types in remittance data and makes sure the payment is reconciled with the bank statement.

For customers that place several orders a month – that can be a lot to keep track of.

Accounts receivable automation simplifies and streamlines these tasks by replacing them with technology. With accounts receivable automation, software does the job for you.

How Do Automated Processes Improve Efficiencies?

One of the main reasons why companies choose to automate some aspects of accounts receivable is to improve efficiencies. It’s more productive to have software perform simple, routine tasks so that employees can focus on more impactful work and strategic initiatives. These more efficient processes can only serve to enhance your team’s productivity and save time and money in the long run.

Automating the process of emailing customers their bills and invoices, collecting payment, and processing those payments will naturally lead to efficiency improvements. This allows companies to scale their operations, which means as they grow, the technology grows with them and they won’t need to hire more people nor spend more time doing the routine tasks that are now handled by software. In short, automation allows you to work smarter, not harder.

Software also reduces the capacity for human error – a misplaced comma or extra “0” can cause a lot of problems with money matters. You don’t want to send an invoice stating $100,000.00 is owed when the correct amount is $10,000.00. This can potentially lead to an increase in disputes and deductions, among other headaches.

Steps to Automating Accounts Receivable

There are several steps to how a company manages accounts receivable. Here is exactly how accounts receivable automation can help:

Electronic Invoicing Presentment and Payment

The process of paper-based invoicing is very time consuming and labor intensive – creating invoices, printing them, affixing postage, and mailing them. Electronic invoicing, or e-invoicing, sends them via email instead – and the process is automated. A platform such as Receivables Intelligence from D&B Finance Analytics provides Electronic Invoicing Presentment and Payment (EIPP), which entails paperless invoicing, as well as an online payment portal for your customer to access their account statements and invoices, pay their bill online, keep track of new orders, and communicate directly with you (instead of calling into customer service).

Disputes & Deductions

A deduction is when a customer disputes a charge on an invoice and the company agrees to remove it from the total outstanding amount. Disputes and deductions can also a very time-consuming and labor-intensive process when done manually. The longer it takes to resolve disputes, the longer your company is waiting to get paid. Automating this process – identifying the disputed charges, validating it (was the item damaged? was the sale price not reflected?), and adjusting the invoice – speeds up resolution times (and hopefully speeds up payment.)

Cash Application

Cash application is another error-prone, manual process that can benefit from automation. In fact, in our recent survey, 41% of respondents stated cash application had the most potential to become automated. Posting and processing payments and reconciling accounts takes a lot of time and effort. The Cash Management application from Receivables Intelligence allows you to seamlessly and securely accept, process & post payments from multiple channels to reduce payment processing costs and help increase cash flow.

Other Benefits of A/R Automation

In addition to efficiency improvements, there are many other benefits to accounts receivable automation. At a high level, automation can help improve key performance indicators (KPIs) such as reducing days sales outstanding (DSO) and increasing cash flow. It can also help prevent bad debt, as the software works 24/7 to help employees better collect on outstanding receivables and more efficiently track customer payments so that they won’t wind up being a write-off.

On a more tactical level, having software automatically email your customers their account statements instead of a person mailing them via the post office reduces paper and postage costs. There’s also the time saved, as you are no longer emailing customers one-by-one either.  

Companies that have implemented accounts receivable automation also report an improved customer experience. Automating customer communications such as upcoming payment reminder emails provides a friendlier experience than a “Your Payment is Late!” email after the due date is missed. Providing flexible payment options with an online portal also improves your customers’ experience in doing business with you.

How to Choose A/R Automation Software

There are plenty of things to consider when choosing the best accounts receivable automation software for your business. When choosing an automated platform, first consider its ease of use. Many companies are looking for a platform that is easy to use, as well as easy to implement and integrate alongside their ERP and their customers’ A/P portals. Some platforms are sold all-in-one, while others are made up of separate applications that you can choose from based on your company’s needs.

Receivables Intelligence from D&B Finance Analytics is an accounts receivable automation platform that offers collections workflow tools, an EIPP, and cash application. The collections workflow tools help track productivity and in-house activities so you can easily see where each account is in the collections process. With the EIPP and cash app tools, you can send invoices online and collect payments online – reducing the time it takes to collect payment via paper checks and bank lockboxes.

Would you like to learn more about Receivables Intelligence from D&B Finance Analytics? Contact us for a personalized demonstration today!

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