Every business looking to free-up the working capital aims to optimize the Accounts Receivable Process. Given how efficient end-to-end Accounts Receivable automation helps the collection of the payments with accelerated receivable process it is surprising that AR automation still lags behind AP automation.

While a business’s habit of sticking to tried and tested manual AR process is one reason, lack of awareness about the benefits of AR automation could be another. In this blog here we help you understand the need and importance of Accounts Receivable automation and give you 5 ways how it can help optimize and grow your business. Read on:

Accounts Receivable – A Life-line for Working Capital Management

Accounts Receivable is the life-line for the cash flow of any business. Referred to as AR, Accounts Receivable refers to the amount that is bound to be received from the customers who have purchased the services or goods on credit from the company.

Ever-increasing Accounts Receivable is an indication of poor collection procedures due to archaic manual AR process where every problem further delays the conversion of sales into cash. Continuous rise in AR increases the demand for a short-term capital requirement which often result in the high-interest burden that lowers the profitability over time and all these springs from accounts not being paid on time. And this is caused due to a multitude of underlying Accounts Receivables problems like:

  1. Lack of versatile payment methods offered to the clients: When payment options a business accepts are limited by your traditional AR process, the client may find it difficult to process the payments at a faster pace.


  1. Missing invoice information: Though data entry errors are common in the manual accounting process and nothing impacts your account as much as inaccurate information on your invoice. While errors can be controlled, sometimes large businesses require specific information on their invoice and when such information is misformatted or missing, the payments can be further delayed or even missed. If you are a small business then this particular task can be daunting especially when you have a large volume of invoices. . In addition to this manually matching the invoices to the payments can also be time-consuming AR process that requires a lot of efforts which can further delay the process.


  1. Invoices aren’t reaching their desired destination: Businesses still using traditional invoicing methods can sometimes find it difficult to reach their customers through post or mail especially during the pandemic situation.


  1. Paper-based AR process: Having a manual AR process that relies too much on paper can result in a lot of wasted time that is spent on filing, faxing, retrieving and mailing while running the risk of being misplaced or even lost all along the process. Even with normal processing, it is estimated that it can take around 16.3 days to process a single paper invoice when a business relies on manual paper-based AR process.

While the above three problems are the most common ones associated with Accounts Receivable process, there are plenty of other problems that can further delay the collection process. Fortunately, you can solve all the above problems by automating the AR process by setting solid collection policies backed up by efficient AR process to ensure consistent payments. Here’s how:

  1. Digitizes entire AR Process: With automation, the entire AR process is digitized from end-to-end. No more printing, retrieving, faxing, mailing or misplacing paper-based invoices as they are delivered digitally using automation.


  1. Automate sending invoices & payment reminders: Invoices with personalized templates can be fed required information and sent with one simple click. You can schedule them well ahead of your time to send them as you please. You can also use automated recurring invoices according to the billing cycle along with payment reminders to your customers.


  1. Automate payment procedures: Automated AR software can help you set-up customized payment gateways to securely receive one-time or recurring customer payments. Enabling versatile online payments helps business get paid faster; with automated invoices and matching protocols, payments become a breeze.


  1. Automated report generation: Generating financial reports can be a daunting task that is time-consuming with manual AR process while being inaccurate. Having an end-to-end streamlined and digitized AR process that tracks payment cycles and account performance simplifies accurate report generation which is a crucial measure and manage the AR process to perfection.


  1. Improved productivity and ROI: With the time-consuming manual process being automated using AR software, employees can spend their time analysing the numbers to generate better reports and come-up with ways to enhance the overall process and spent more time delivering better customer experience.

Automated AR process is also found to reduce the Days Sales Outstanding, past-due receivables, and also bad-debt reserves and enhance ROI in as little as 3 months of adopting automation. However, if you are a small and medium business looking to benefits from automated Accounts Receivable process for business growth but are apprehensive about the investment required you can leverage all the benefits with minimal risk by outsourcing Accounts Receivable to remote accounting firm likes us at Back Office Accountants. For Accounts Receivable, Accounts Payable and Full-service Back-Office Accounting Services, you can contact us here: https://www.backofficeaccountants.com/