What Is Accounts Receivable (A/R) Automation and How Can It Help?

Published on March 7, 2022

Accounts receivable 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 accounts receivable 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 report by e2b teknologies, nearly half of B2B SMBs 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 accounts receivable, 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 accounts receivable 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 accounts receivable and spending a lot of time on manual effort – even though the gains for companies launching accounts receivable automation are large. Why? We suspect a lack of awareness. So, if accounts receivable automation simply mechanizes those manual processes, how does it really work?

Automating the Accounts Receivable Process

The accounts receivable process manages outstanding sales not yet paid by customers. Exact workflows may vary by business, but the basic accounts receivable process follows these steps:

  1. Billing – Invoices are sent to customers
  2. Payment Collection – Customers pay outstanding invoices
  3. Reconciliation – Payments are matched to invoices and records are updated

Traditionally, each step in this workflow involves many manual processes, which are time-consuming and inefficient. Accounts receivable software allows you to automate many of these processes to save time and money.

Learn how to automate your accounts receivable billing, collections, cash application, and reconciliation processes with our Ultimate Guide to Automating Accounts Receivable Process.

Benefits of Accounts Receivable Automation

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 accounts receivable team uses this spreadsheet as their system of record for collecting payments.

Whether they are printing or e-mailing one-off invoices, the accounts receivable 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.

Accounts receivable 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 accounts receivable 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 accounts receivable’s time and attention and communicate efficiently with internal stakeholders.

Real-World Examples of the Benefits of Accounts Receivable Automation

Implementing accounts receivable 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.
  • Restaurant software Chowly introduced online payments and autopay to decrease days sales outstanding by 28% and increase on-time collections by 53%.

Accounts Receivable Automation Made Easy With Invoiced

Invoiced’s accounts receivable automation software lets you program your entire accounts receivable operation, complete with dashboards, integrated reporting, and specialized tools for efficient, effective Accounts Receivable management. If you’re ready to automate your accounts receivable process, we invite you to book a demo and see for yourself how Invoiced can revolutionize the way that you do business!

Published on March 7, 2022

Latest Stories

Here’s what we've been up to recently.

Hand using an example of an Invoicing API software
Invoicing APIs can automatically collect payments from customers among other benefits – learn everything you need to know about invoicing APIs here.
Learn how to track and calculate the most important accounts receivable KPIs you need to measure your business’s success. Includes examples.