Published: October 01, 2020
In ten years’ time, companies will probably still be working towards faster processing and enhanced business intelligence through automation and artificial intelligence (AI). It will be the new normal to store data in a single digital repository so that accounts receivable (AR) teams have easy access to real-time, accurate data for matching payments, deduction handling, fast collections and data-driven business intelligence with improved reporting capabilities.
Industry pioneers are constantly looking forward to solutions that are adaptable to changing trends and market requirements. Cost savings, improved cash flow and a reduction of manual errors are the drivers of the financial health of any organisation. With flexible and forward-looking technology, businesses can optimise their cash flow and focus on making critical decisions backed by reliable data.
To control AR systems, it is essential to design a long-term, outcome-based process. The success of the digital transformation of AR depends on a seamless implementation and integration of new technology with the company’s existing technology. Finance professionals should focus on automating AR to streamline everyday operations and manual tasks.
While accounts receivable processes have changed significantly over the past decade, there is still a great deal of scope for further evolution. AR teams today still carry out many repetitive tasks manually. These include remittance data aggregation, data key-in, cash posting and accessing credit data The result is minimal focus on the business-critical, high-value functions of actual credit decision-making and collections correspondence with high-risk customers. Manual processes tend to be time-consuming and error-prone, impacting exception handling and error correction, which increases operational expenses and affects overall profitability.
The irony is that most of these tasks could easily be automated. While it takes time and effort to find the right technology vendor, it’s a sure way to prioritise high-value AR functions while gathering the low hanging fruit by automating repetitive functions, resulting in higher efficiency, better use of resources, reduced operational expenses, enhanced working capital, improvement in critical metrics such as hit rates, the Collection Effectiveness Index, days sales outstanding (DSO), bad debt write-offs and days deduction outstanding (DDO).
However, the future isn’t going to be easy. Businesses will become more complex, customers will come up with different remittance formats, there will be new payment methods, companies will contrive more types of deductions: the list is endless. While it seems intimidating, the solution is for finance leaders to assess technology solutions based on the following factors:
While these are some key questions to consider while evaluating technology vendors, the key is to find a vendor you can partner with - one that can grow as your company and business requirements grow. Automating AR functions in today’s economy is not a question of ‘if’ you automate, but ‘when’ you automate to reap the benefits of the digital disruption.
Digitising and automating the AR process can lead to a dramatic reduction in manual, repetitive work. This provides a major opportunity for companies aiming to leverage automation to help AR teams focus on the business-critical functions of order to cash (O2C). Businesses today are seeking digital solutions that can address challenges such as payment processing, deduction handling, customer onboarding, credit risk assessment and collections management. In the absence of an accurate, predictive, and efficient solution, there is a risk of decreased cash flow leading to bad financial health. How can automation and AI help?
Having digital availability of information is the only way to survive the current pandemic. Automation is the key to boosting overall productivity while providing accurate factual information for teams working remotely. Enabling easy access to real-time, reliable and relevant data could make all the difference between getting paid and a customer account becoming delinquent.
End-to-end visibility enables easy access to a multitude of data in varied formats. If access to relevant order details and account information is lacking there is risk of increased bad debt write-offs. Digitally enabled AR solutions provide business intelligence to underpin better financial decisions. Receivables analytics and forecasts with drill-down capabilities furnish AR teams with data-driven insight into customer accounts and market trends, enabling them to fine-tune short-term strategies and take corrective measures to achieve long-term goals.
Get better visibility into potential revenue leaks and opportunities for cost savings by taking control of your AR process. Companies are moving towards reducing manual work by leveraging automation and re-allocating resources to high-value functions in order to save on operational costs.
The primary challenge that businesses face today and are likely to continue to puzzle over during the next few years, is gaining accurate visibility into cash positions in order to formulate long-term business strategies. Credit and collections processes have key roles to play in improving cash flow. Automating manual aspects of these functions such as data aggregation and worklist prioritisation enables analysts to focus on primary high-value aspects of efficient credit collection.
With reduced manual intervention and a prioritised approach to customers, a cloud-based solution can help in reducing DSO. When payments get collected on time, more time and effort can be switched towards at-risk customers and invoices.
Cash application is one of the primary candidates for automation. Businesses need to identify and partner with the right vendors to enable 100% straight-through cash posting.
The new normal of a remote workforce plus evolving trends in available payment options mean that finance leaders need to consider the scalability and payment processing capabilities of their AR solutions. A desirable future solution is one which could support multiple payment options and enable straight-through cash posting.
With online credit application, businesses could eliminate the ad-hoc collaboration with customers to capture missing details while easily validating credit information through in-built integration with credit agencies. With AI-powered credit scoring models capable of processing and analysing vast amounts of data on company size, revenue, industry payment trends, financial data reports and business history, companies would be able to automate credit decision-making while ensuring compliance with policies and creating an audit trail.
Predictive analytics backed by customer history and market trends play a major role in collections. Traditionally, collections as a process have been reactive, starting after the invoice is due. AI-powered automation would help businesses design proactive collections strategies based on leading indicators to flag potential delinquents, while automating correspondence with low-risk accounts.
In a market brimming with competitors who provide similar products and services, the only aspect that drives customer loyalty is a positive experience. AR processes include multiple touch-points with customers, making positive customer experience a priority. A holistic AR solution that eliminates siloed processes would go a long way towards ensuring access to relevant information and reducing the amount of redundant, ad-hoc collaboration. This would help collectors and credit analysts have positive, data-backed dialogue creating a positive experience for customers.
Traditional A/R
Digitised A/R
In the near future, artificial intelligence (AI) will continue to leverage large amounts of structured data to handle much decision-making. Payment behaviour can be key to solving the economic shifts in a variety of sectors. And you don’t necessarily have to start from scratch in order to optimise your AR: you can either pick one area at a time or go all-out and optimise everything at once. Any step you take towards enhancing AR will prove beneficial in the long run.
Bill Weiss
Vice President of Business Development - Credit & Collections, HighRadius
Bill Weiss specialises in strategic partnerships within the credit and collections industries. He has long experience of credit risk and accounts receivable management in several organisations, including co-founding The CreditExchange, one of the first B2B online trade credit bureaus, and starting and heading his own consulting firm.
More than two-thirds of credit and collections professionals report that overdue Accounts Receivable (A/R) averages are greater than 10% of their portfolio, according to the FIS 2019 Credit and Collections Market Report: Modernising Credit-to-Cash with Artificial Intelligence that surveyed more than 100 credit and collections professionals. Of the respondents 78% report that over the past […]
The benefits of implementing a treasury management system (TMS) to optimise one’s treasury operation have been well-known for a number of years, but in recent times the traditional scope of the treasurer’s responsibilities and the tools at their disposal have broadened substantially. Not only can treasurers now use a TMS to eliminate manual, spreadsheet-based activities […]
According to this year’s responses to the EACT’s annual pan-European survey, the pandemic has not changed the top priorities of corporate treasurers. Instead, it has crystallised the need for increased digitisation. The European Association of Corporate Treasurers’ (EACT’s) annual survey reveals the top priorities for treasurers during the year ahead, identifies critical challenges facing the […]
