Accounts Receivable for SaaS Companies: Why Automating AR Is Essential

Why is an A/R process important for SaaS companies? 

Compared to most other industries, SaaS providers often deal with longer days sales outstanding (DSO) — a metric that records the average time it takes for a business to receive payment after it sends out an invoice. A recent study by commercial collection agency The Kaplan Group found that in 2024, SaaS businesses waited an average of 54.03 days to receive payment.

Given that a 30-day payment due date is pretty common, a 54-day DSO suggests that a majority of SaaS companies’ invoices aren’t being paid on time. The longer it takes for a given business to complete its invoice-to-cash (I2C) cycle, the less capital it will have in hand to support not only daily operations but also future plans.

Returning to the previously mentioned Atradius survey, late payments from customers typically have broad, downstream effects on sellers, with the most commonly cited issues being:

• Struggles in meeting financial obligations (42% of respondents)
• Delays in payments to suppliers (40%)
• Reliance on more short-term financing (29%)
• Postponement of investments in property, plants, and equipment (28%)
• Interruptions to payroll and other bill payments (27%)

Any one of these problems can dramatically undermine a business’s health, but with effective accounts receivable processes in place, you can dramatically cut payment timelines and free up cash much more quickly.

Challenges of managing A/R for SaaS companies 

Several underlying causes exist for the complicated A/R and extended DSO standards to these organizations. For example:

• Billing structures: There are quite a few payment options common among SaaS businesses (e.g., usage-based, subscription-based, hybrid) with some providers offering multiple options at any given time, and each of these approaches come with their own invoicing demands.
• Incentives: To attract new customers, many organizations offer trial periods, usage-based discounts, tiered subscriptions, or even freemium products — all factors that can complicate billing.
• Rapid growth: Given that most software delivery is now cloud-based, it is possible to easily accommodate massive spikes in sales from a production standpoint, but ensuring that all of those new purchases are properly billed and collected on can quickly prove overwhelming for your A/R staff.   
• Global payments: When offering service-based products, there’s a good chance that your subscribers might be located anywhere on the planet, so you’ll need your A/R processes to be able to support a diverse set of currencies and regulatory requirements.
• Revenue recognition: For those SaaS providers within the United States, they’ll need to comply with Generally Accepted Accounting Principles (GAAP), which demands that revenue be recognized as it is earned, something that can quickly become complicated for an ongoing subscription or license.

How can SaaS companies improve A/R? 

Fortunately, quite a few strategies are available to help optimize your A/R and overall cash flow. These efforts will predominantly focus on creating incremental efficiencies within your frequently repeated processes or funneling more accurate, reliable, and timely information to executives and key decision makers.

Some actions we recommend you prioritize include:

• Embracing AI and automation: Manually-driven processes are generally inefficient and prone to error, which can—in an A/R context—lead to payment disputes and delays. Instead, migrate as many invoice-adjacent functions as you can to automated processes that cut down on direct human interaction with financial data.
• Accepting more payment options: Not only will supporting a broader assortment of payment channels—e.g., credit card payments, automated clearing house (ACH) transactions, wire transfers—help broaden your potential pool of customers, it will also help avoid payment disruptions or delays as subscribers will routinely opt for the method that’s most convenient for them.
• Monitoring operations closely: Wherever possible, pursue real-time visibility as it relates to your financials across a broad range of critical metrics. This insight will help you more quickly detect anomalies consistent with fraud or process failures, and with an accurate, up-to-date understanding of your available cash, you’ll also be  better equipped to plan for the future.
• Focusing on retention: SaaS providers’ main source of income is recurring payments from existing customers rather than attracting new business. To avoid unnecessary churn, prioritize customer service and proactively flag and resolve avoidable payment disruptions, such as credit card expirations.

Benefits of accounts receivable automation for SaaS companies

Of the strategies listed above, we here at Invoiced (a Flywire company) believe—for obvious reasons—that leveraging AI and automation offers the most direct, efficient, and cost-effective strategy for improving overall A/R.

Increased accuracy

Traditionally, A/R was dominated by paper-based processes and manual oversight. These efforts were prone to frequent transcription errors, invoice duplication, and other challenges caused by human fallibility. Even today, many organizations—including SaaS providers—rely on outdated A/R strategies built around loading financial data into common spreadsheets and copying or transcribing relevant information between systems.

However, by eliminating the human element from most operations and migrating information directly across platforms, automation can bypass these errors and yield more accurate and timely invoices and financial records.

Accelerated payments

Businesses can dramatically shorten payment cycles and their overall DSO by avoiding the disruptions caused by inaccurate records and relying on centralized, automated workflows to create invoices, send dunning notices, and perform various validation functions. Automated systems run 24×7, operate at the speed of software, and remove unnecessary process delays common to manual efforts. So, any wait times in the I2C cycle won’t be due to your efforts.

Satisfied customers

Few things will annoy a customer more than sending them an inaccurate invoice asking for more money than they actually owe. But contacting them to pay when they’ve already sent you the money is easily one of them.

Fortunately, automation alongside an AI-powered cash application—the process of crediting incoming payments to the appropriate customer account—can help avoid these hassles. When your customers are more confident that you’re billing them correctly, they’ll be much more likely to use your software for the long term.

Stabilized cash flow

Buyers tend to be more inclined to respond to invoices when they receive these notices close to the delivery date of their ordered goods or services. Similarly, consistent, repeated dunning efforts—like those driven by automation—are also more likely to elicit prompt payments, helping to prevent overdue invoices from fermenting into bad debt.

At the same time, the surrounding A/R-related metadata commonly collected by automation platforms can often be leveraged to create more accurate cash flow forecasts, meaning that SaaS providers—and, more precisely, their stakeholders—are better equipped to make planning and budgeting decisions for the near and long term future.

Improved flexibility

As previously mentioned, SaaS companies benefit from the ability to scale operations quickly and easily to accommodate sudden increases in their user base. A/R automation makes it easy to align your invoicing and billing efforts with this more profitable reality. 

Depending on your solution, you might need to invest in more processing resources. If you’ve opted for cloud-based accounts receivable software, the platform will readily adapt to this increased workload, handling the repetitive, mundane operations for you while your accounting staff remains free to focus on more strategic tasks.

6 key features SaaS companies should look for in automated accounts receivable software 

Not every automated billing system for SaaS will be sufficient to meet your unique needs, so SaaS providers should thoroughly vet any solution before making a purchase. You should at least opt for an offering that delivers:

1. Flexible automation

When choosing a platform, your top priority will be a robust automation engine. You’ll want one that your staff can update and modify, allowing authorized users to easily adjust invoicing workflows to align with new business realities. Ideally, the system will also be able to handle more complex billing requirements—such as deductions, discounts, subscription upgrades, and split payments—without direct human intervention.

The automated processes shouldn’t exclusively relate to invoice creation. Our solution, for example, includes a Smart Chasing function that lets you set specific messaging cadences for your dunning efforts, which the software performs and manages, leaving you free for other tasks.

2. Customizable reports

There are all manner of metrics and key performance indicators (KPIs) that you should be tracking to ensure that your A/R efforts are running optimally. Many automation platforms will provide you access to these details in established dashboards or financial statements.

With our platform, we offer a number of pre-built reports that are out of the box. Our optional Advanced Reporting add-on allows you to build out your accounting records and data feeds using hundreds of objects and field types. This increased insight, in turn, empowers you to dial in on the operational data you need to identify process bottlenecks, isolate abnormalities, and fine-tune performance.

3. Broad integration support

Traditionally, migrating financial information between your invoicing platform and your broader enterprise resource planning (ERP) solution has the potential for transcription and translation errors. But modern A/R solutions can typically integrate with the most common ERP platforms currently on the market, letting you seamlessly shift data to where it’s needed.

Even better, look for a system like ours that offers application programming interface (API) access so that you can directly integrate our tools into your current financial systems.

4. Self-service payment options

The more control you have over the payment process you transfer to your customers, the less time you’ll need to tie up your staff for routine operations. For our offering, we’ve included a self-service payment portal that allows buyers to independently manage their subscriptions (along with any related add-ons), update payment details, register disputes, and initiate payments.

5. AI-powered optimization

At this point, automation and AI go together, so look for platforms that leverage advanced algorithms or machine learning in some capacity. These solutions can routinely detect patterns more subtle than human perception and offer speed and performance boosts beyond their non-AI-powered peers. 

Consider our CashMatch AI function, which can flawlessly route incoming payments to the appropriate customer accounts in seconds—even for partial payments or those covering multiple invoices at once.

6. Global payments

As previously mentioned, SaaS providers often have a global customer base, so you’ll want a platform to easily accommodate local currencies, financial regulations, and tax law. After all, cross-border payments can quickly become expensive due to bank transfer charges, currency conversion fees, and fluctuating exchange rates.

To combat these realities, we’ve updated our solution with Flywire software. This software allows users to avoid traditional intermediary banks and their associated fees while offering the ability to lock in exchange rates or use real-time values, depending on which strategy is more financially beneficial to all parties.

Ready to Automate Your A/R? Get Started with Invoiced

If you’re convinced that an automation strategy is right for your business, you can’t go wrong with our Accounts Receivable Automation platform. Drive more revenue, stabilize your financials, keep key stakeholders better informed, and set your company up for success—all while decreasing the labor and time investment needed for your financials.

If you’re still not convinced that AI and automation make sense for your A/R, schedule a demo and see what’s possible.