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What is accounts receivable (A/R) automation and how can it help?

Accounts receivable (A/R) is arguably one of the most important functions of a business.  If customers are paying for any per...

Accounts receivable (A/R) is arguably one of the most important functions of a business. If customers are paying for any percentage of their purchase on credit, this critical department (or individual) is, in many cases, solely responsible for collecting payments. Without those payments, the company may not survive.

And yet, even though A/R plays such a critical part of a surviving (and thriving) business, it is very frequently neglected. Just take a look at these numbers to understand how:

  • According to a 2014 report by e2b teknologies, nearly half of B2B SMB’s manage their accounts receivable processes with minimal workflows in either their accounting software or ERP system.

  • Research and advisory firm Paystream Advisors found that for businesses using manual processes for A/R, 15% of their time is devoted to prioritizing work, another 15% is spent just assembling data to collect, and a mere 20% is consumed on customer correspondence regarding collections.

  • Paystream Advisors also found that companies using A/R automation could reduce their prioritization and fact-finding by more than half, and triple their time spent on customer communication!

In a nutshell, businesses are using ineffective tools to manage A/R and spending a lot of time on manual effort - even though the gains for companies launching A/R automation are large. Why? We suspect a lack of awareness. So, if A/R automation simply mechanizes those manual A/R processes, how does it really work?

A/R automation offers businesses an online framework to manage A/R with limited human interference.

Just for comparison’s sake, let’s say that today your business keeps track of customer payments using a master spreadsheet. The spreadsheet includes customer data, payment terms, and invoicing requirements. The A/R team uses this spreadsheet as their system of record for collecting payments.

Whether they are printing or e-mailing one-off invoices, the A/R team expends a lot of manual effort to collect payments. Payment options for customers are probably limited, and late payments are hard to find and time-consuming to follow-up on.

A/R automation provides a standard format with key data inputs for invoices, customer details, and payment terms. Users can enter data once and let the system manage itself. If a customer is billed on the 1st of each month, the platform will send those invoices automatically. Taking the process online also opens up a range of payment options, which increases the likelihood that customers will pay in a timely manner.

Businesses using A/R automation can also take advantage of workflows that put the heavy lifting on the billing platform. Gone are the days of repeatedly calling a customer whose credit card has expired, forgoing incentives because they take too much effort to manage, or the lengthy back-and-forth of the contract signature process.

Dunning management tools automatically contact a customer when a card is expired. Customized payment logic allows users to program in time-based discounts to incent early payments or penalties to deter late payments. Sign-up pages offer customers the ability to agree to contract terms as part of the invoicing process.

And last, but definitely not least: gathering collections data in a standardized online format allows businesses to easily view collections performance AND connect with other back-office software - like accounting and ERP systems. These benefits make it easier to identify exceptions that need A/R’s time and attention and communicate efficiently with internal stakeholders.

Invoiced customers have achieved huge benefits using A/R automation.

Implementing A/R automation is quite a game-changer for many businesses. And you don’t have to take our word for it - check out these impressive results from our customers:

  • Academic tutoring company AJ Tutoring leveraged automation to increase accounting staff speed by 20%, and now maintains 97% collections efficiency.
  • New Zealand electricity provider Flick Electric scaled automated invoicing capacity to 64,000+ invoices per month.
  • Public-interest law firm Immigrant Law Group implemented payment plans and reduced time spent on billing by a whopping 70%.
  • Database access manager strongDM launched one-click onboarding and dropped time spent on billing inquiries by 20%, reduced customer support inquiries by 25%, and decreased their days sales outstanding (DSO) by 30%.
  • M&A project management platform DealRoom added contract terms to sign-up pages and now gets paid 80% faster.

Want to learn how your company stands to gain from the power of A/R automation? Contact Invoiced for a demo tailored to your unique business requirements.

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