How Accounts Receivable Automation Delivers Value for Businesses

Published  3 MIN READ

Accounts receivable (AR) automation can offer a solution to the challenges posed by the need to reduce overheads, collect payments, and grow a business as the global economy recovers from the pandemic.

Building business resilience in order to prepare for future disruption and making working capital function more effectively have never been bigger priorities for business leaders.

Improving cash flow can help businesses achieve both these objectives and one way to do this is by automating the AR department. AR automation can improve cash flow, while enabling organisations to save money, be paid earlier and access intelligence to inform strategic decision-making.

As the term suggests, automation eliminates many of the repetitive manual processes involved in accounts receivable, such as recording transactions, updating ledgers and invoicing, sending reminders to tardy payers, and maintaining records. These tasks can be performed more accurately and economically – and considerably faster – using a cloud-based automated AR platform. Switching to this kind of platform can reduce manual processing by 85% and the cost of running an AR department by 70%, freeing up resources and enabling the redeployment employees. That makes it an investment that will typically pay for itself within a year.

Payment trends

While this technology offers considerable potential value, the more significant benefit is arguably the business intelligence that the software provides. AR automation offers a real-time view of customers’ payment patterns and trends – this information can be used to tailor reminder and dunning processes, which in turn will speed up the payment process by days, or even weeks.

Some customers, for example, may disregard specified payment terms, triggering the need for reminders and follow-up phone calls. Understanding this behaviour means the process can be accelerated and payments received sooner than if the AR team waited the usual interval of a few days between interactions.

On the other hand, pursuing people for payments that they have already made may cause friction in customer relationships. Automated AR technology enables the saving of time and resources by not chasing debtors who have already paid but whose payments haven’t been applied correctly, or are sitting in a pending file. 

Growth while avoiding risk

AR automation can also enablee the assessment of customers’ ongoing creditworthiness far more easily than a manual AR system.

When acquiring customers, many organisations carry out an initial credit report and conduct due diligence but this is not reassessed until a problem arises. Instead, with the insights offered by AR automation, a business can access ongoing credit worthiness. This software provides customer attractiveness scores on a continual basis and uses the information to make recommendations about whether to rescind or extend credit.

This intelligence can then drive better decision-making, enabling companies to make the most of ‘attractive’ customers who are in growth mode, by extending credit and helping them to develop  their business.

Automation during the Covid-19 pandemic

Interest in AR automation has grown considerably in the past few years. In a global economy in which an increasing number of organisations are multi-ERP [enterprise resource planning], multicurrency, multi-bank and multilanguage, introducing solutions that help to remove complexity and save time is a no-brainer.

In addition to this, over the past 18 months, AR automation has been incredibly useful in managing some of the restraints and challenges of the pandemic. For example, with businesses having cash held on balance sheets and limited access to borrowing, automation can help to relieve these difficulties by unlocking capital. The technology enables the collection of payments earlier than usual (by 10 days in some cases), giving access to working capital far sooner.

The post-Covid era

The post-Covid economy will continue to throw up opportunities aplenty for UK businesses in a position to act. Investing in automated AR technology means firms will be able to reduce overheads, improve cash flow and gain insights that inform strategic decision-making. For any business striving to survive and thrive in the post-Covid era, that’s a winning trifecta of benefits they can ill afford to bypass.